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The Study On Executive Stock Option Incentive Of The Listed Companies

Posted on:2010-11-01Degree:DoctorType:Dissertation
Country:ChinaCandidate:N GongFull Text:PDF
GTID:1119360272498291Subject:Business management
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The economic development of the enterprise is related to the enterprise system, especially the plan and the choice of the incentive system. In the past half a century, the enterprise system (especially the incentive system) had many new developments in western countries. The most effective one is the generation and development of the stock option system, which gradually showed huge effect and adapted itself to world trends. It plays an indispensable and important role in the human resource promotional system and brings forth new ideas in the enterprise's incentive system. The enterprises apply this new incentive measure to perfect their management and align the interest of the business operator with the long-term interest of the enterprise. The stock option incentive system is regarded as the important source of the fast growth of the economy of the United Stated in the recent decade. We integrated survey the current situation, the influence factors and the economic consequences of the executive stock option in the listed company in our country under the special systematic condition in China.In the chapter 2, we have a retrospective review of the influence factors of the executive stock option and the accounting treatment of the stock option incentive. By means of the review, we explain the meaning of the executive stock option, the relationship between the manager shareholdings and the company performance, the influence factors of the enterprise stock option preference and the level of the stock option in the incentive plan and the accounting treatment of the stock option incentive. The empirical evidence of the research abroad and the current research situation of the Chinese listed company are the foundation of the design of our empirical study. According to the reviews of the influence factors and the accounting treatment of the stock option incentive in the theoretical framework and the empirical evidence of the document at home and broad, we find that, first, there is not a coinciding conclusion about the relationship between the manager shareholdings and the company performance, thus, the company carry out the stock option plan not only to improve the company's performance. Second, according to the related analysis, we find that the goal of the stock option plan is to alleviate the principal-agent problem of the company, increase the incentive of the managers, induce the management delegated with investment decisions to select and implement only profitable projects for a firm, select and attract specific types of employees, provide a solution in employee compensation for firms facing financial constraints. Third, the level of the stock option is influenced by the following factors: the agency cost of the company, the turnover of the CEO, the fluctuation of the information, the liquidity. Fourth, there are some studies that focus on the introduction of stock option plan for employee compensation, which however cannot be used to infer conclusion for the case of the determinants of the level of CEO stock options. Fifth, according to the laws and regulations in our country, expensing the stock option is the mandatory requirement. This accounting treatment many influence the company performance and the securities market.In the chapter 3, according to above-mentioned discovery and features, we carry out a theoretical analysis. In this part, we introduce the theoretical principle of the stock option incentive policy and the accounting treatment of the listed company, make an analysis of the special systematic condition of our country and carry out the study design and empirical test in the empirical analysis. This chapter has two parts. First, we introduce the theory of the stock option system and its accounting treatment of the listed company in our country. Meanwhile, we analyze the related systematic condition. According to the influence factors of the preference of introducing of stock option plan and the level of the stock option in the incentive plan before the equity incentive plan is implemented and the accounting treatment of the stock option after the equity incentive plan is implemented, we reach six inferences. Those inferences are the objects to be tested in the following empirical analysis chapter. Second, we establish a framework for general analysis of the executive stock option of the listed company. According to the status of knowledge at home and abroad and the current situation of Chinese company, we discuss the theoretical mode, seek the corresponding proxy variable and carry out the study design of the empirical analysis.In the chapter 4, according to the previous theoretical analysis and study design, concerning the different implementation stage of the equity incentive plan of listed company in our country, we explore the current situation of Chinese stock option incentive system, the influence factors and the economic consequences of the equity incentive plan of listed company and its accounting treatment. China Securities Regulatory Commission promulgated the Measures for Administration of Equity Incentive Plans of Listed Companies (For Trial Implementation) in 15th, November 2005 and this measure is implemented since first, January 2006. Moreover, the Notice of the State-owned Assets Supervision and Administration Commission of the State Council and the Ministry of Finance on Issuing the Trial Measure for Implementing the Equity Incentive System by the State-Controlled Listed Companies (Domestic) was issued in September 2006. The issue of these two notices began the establishment of the standard eqtuiy incentive system of the listed company in our country. Form the end of 2005, many of our listed companies put forward its equity incentive plan. The change in the laws and regulations of the State offers a unique opportunity for us to examine the features of Chinese equity incentive system, the influence factors of introducing of stock option plan and the level of the stock option in the incentive plan and the stock price reaction to the announcement of option-based compensation plans.The analysis of the current situation of Chinese listed company indicates that in the current equity incentive system the level of the stock option is different between different industries and company's share capital. But, in the incentive plans with different quantities, except for the source of the subject matter, the term of validity, the illustration of selling the incentive stock, the term of granting the incentive stock option, the special term of the option exercise and its indicators have no significant difference.The results of the empirical study indicate that the stock option incentive policy of our country's listed company supports the incentive theory, but do not supports the selection theory, nor supports the liquidity constrain theory. The results also indicate that the influence factors of the introduction of stock option plan for employee compensation are different from the determinants of the level of CEO stock options.Taking Yili Industrial Group. for example, we analyze the accounting treatment of stock option expense and its economic consequence. We find that expensing equities incentive does not influence the operating status of the primary business, the actual operation capacity, nor influence the quality of the corporate assets, and the asset value do not change. But the expense of the stock option can directly affect the company's net income every year. The stock price will react to the announcement of option-based expense. The extent of the reaction is directly related to the expensing effect on the performance. Compared to other company, if the expensing equities incentive causes the company to make gigantic losses, the market will have greater reaction. The more losses the company makes, the greater the market reaction will be (such as Yili Industrial Group.). Meanwhile, the accounting treatment of expensing equities incentive may cause the companies to alter the stock option plans.In general, we analyze the influence factors of the stock option incentive and its accounting treatment by theory. These theoretical analyses are the theory foundation of the following research hypotheses in empirical analysis. After a general overview of the research results at home and abroad, based on the special systematic condition and the current situation in our country, we carry out our empirical analysis from tow aspects. On the one hand, we investigate the influence factors of the preference of introducing of stock option plan and the level of the stock option in the incentive plan before the equity incentive plan is implemented, on the other hand, we investigate the accounting treatment of the stock option after the equity incentive plan is implemented. The result indicates that, though in our country some companies carry out the stock option incentive system to incentive the mangers, the incentive system is still at grouping stage in our country. The related laws and regulation are imperfect now. Thus, the preference of introducing of stock option plan, the level of the stock option in the incentive plan and the accounting treatment of the stock option etc need perfect and great effort of related government department and listed companies. The results of the study supplement the theoretical framework of the stock option incentive and its accounting treatment of Chinese listed company. Besides, we provide the data support for the design of our country's equity incentive system. The results can help the related policy surveillance department and listed companies to draw up the incentive system which is suitable for the development of the listed company as well as provide the theoretical reference for the department which is responsible for the policy making. Meanwhile, the results are helpful in perfecting the stock option system of listed company in China.
Keywords/Search Tags:listed company, executive stock option incentive, empirical analysis
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