A Study On Executives Equity Incentive Effect Of Institutional Investors Holding Shares From Corporate Governance Perspective

Among agent problems caused by Two Right Separation in modern enterprise system,the interest conflict between shareholders and managers is the principal problem that modern enterprises are facing.It's also one of the core issues for many Corporate Governance researches.Therefore,it's been the important topic in the field of Corporate Governance that how to effectively motivate managers to create more value for shareholders.Equity Incentive,as a long term stimulation method,has been used all over the world since it can converge the interests between managers and shareholders.Unfortunately,lots of theoretical researches and practical experience show that equity incentive in certain circumstances actually acts a way of the Executives to seek their own benefit and deprive shareholders' interests.At present,it's still controversial whether the implementation of Equity Incentive reduces or increases the agent cost.However,the Institutional investors,with their capital scale,the quick speed of collecting and processing information,professional analysis skill and rich experience,play an important role in the capital market.The investors are qualified to some extent to supervise the Executives in corporate operation and make their own contributions to Corporate Governance.In this context,it's of great significance to make use of the supervision and monitoring of the institutional investors to encourage the Executive to create more value for shareholders and improve the Equity Incentive effect.Meanwhile,with the growth of Chinese institutional investors team,whether the institutional investors can play an important role in Corporate Governance has gained a wide attention in academia.Thus,in this paper,it's significant both in theory and practically to do the Research on Executives Equity Incentive Effort on Institutional Investors to hold more Shares Based on Corporate Governance perspective.Around the theme in this paper,it's inevitable to get a further study on the following three sub-questions with intrinsic logic.The first question is how the actual effort of Equity Incentive that A-Share listed enterprise implemented is.The second question is whether the Equity Incentive can attract the institutional investors to hold more shares.Thirdly,it's to be verified whether holding shares by the institutional investors has positive effect on Equity Incentive.In order to solve the issues mentioned above,it summarizes the existing relevant documents at the beginning of the paper.Then,by adopting the Propensity Score Matching(PMS)Model and by selecting the companies that have been implementing Equity Incentive Plan from 2009 to the end of 2015 as samples,it uses the index data of those companies during 2009 to 2015 to research the effect of Equity Incentive Plan and practically verify the effect of the company nature,equity concentration and incentive method on Equity Incentive plan.Afterwards,by focusing on the Nonparametric Wilcoxon Signed Rank Test and using Parameter T test method as supplement,the author analyzes how the factors like the incentive method,scheme progress,validity,incentive intensity and the company property work to improve the influence of Equity Incentive Plan on institutional investors.Finally,this paper holds empirical tests on the relations between investor's holding shares and Equity Incentive effect and the relations between the heterogeneity of institutional investors and Equity Incentive effect through panel model with interaction terms.Accordingly,this paper comes a conclusion that the implementation of Equity Incentive of listed companies can help lift the companies' performance and to create more value for shareholders.And the listed companies with Equity Incentive Plan can greatly attract the institutional investors to hold more shares.With that,the author finds the institutional investors play a great role of governance in Executive Equity Incentive and can improve the incentive effect obviously,which shows the stimulation effect of Chinese institutional investors on Equity Incentive Mechanism can ease the principal-agent problems apparently.The innovation of this paper can be illustrated as follows:For the content,it pays much attention to the institutional investors' significance of Equity Incentive in corporate governance.The existing studies demonstrate the Chinese institutional investors are actively participating and play role in corporate governance.But it's still rare to study the governance role of institutional investors in Equity Incentive,especially actual effect of institutional investors on Equity Incentive.While this paper researches the institutional investors with Equity Incentive can play great role in Corporate Governance,which eases the relevant principal-agent problem and improves the Corporate Governance level in Chinese Capital Market.More importantly,it finds the beneficial factors that lift the Equity Incentive Effect.Therefore,this paper not only enriches the content in the field of research on institutional investors and equity incentive,but also can provide decision-making reference for the perfection of China's equity incentive mechanism and the development of institutional investors' role in corporate governance.In terms of research methods,it adopts the Panel data Model with Interaction items and uses Generalized Least Square Method to estimate the model parameters to study the influence of institutional investors on Equity Incentive effect.Also,for the sample selection,the author pays much more attention to samples' effectiveness and employs Propensity Score Matching(PMS)Model to overcome the Sample Selectivity Bias,so the conclusions are more reliable.With regard to the research perspective,it focuses on the integration of theory and practice,which can guide to resolve the governance issues practically.The development of institutional investors and the perfection of the Equity Incentive mechanism are the key measures to improve the healthy development of capital market and the governance level of listed companies.Through the research conducted in this paper,we can figure out the beneficial factors to raise equity incentive effect and perfect the equity incentive mechanism in China.And,it offers practical guidance for the development of institutional investors by analyzing the governance roles of different kinds of investors.