Rearch On Managerial Opportunism With Stock Incentive Plans

The effectiveness of stock incentive plans is a core issue in the field of corporate governance.As innovative compensation mechanism ofalleviating the principal-agent problem,the stock incentive plans are appreciated and implemented in the western developed countries and regions.However,stock incentive plans have gradually exposed managerial opportunism of maximizing the incentive gains in practice,causing increasing query on their efficiency.On December 31,2005,the China securities regulatory commission promulgated the "measures for the management of the listed companies,stock incentives(try out)".From then on the stock incentive mechanism develops rapidly.In the implementation process,it has been always questioned that whether the stock incentive plans are effective tool of maximizing shareholders' value,or they are just existed to reward managers.Since 2016,the State Council has stressed several times to carry out,research,improve the stock incentive system.At present,the construction of stock incentive system and the practice of listed companies is at a critical stage,thus it is urgent to analysize theoretically and make empirical test on the potential moral hazard and long term incentive effect,and to rethink and examine the perfect degree of environment and capital market,the corporate governance mechanism and the rationality of stock incentive contract design.There are different kinds of managerial opportunism in stock incentive plans,among them,how the managers with incentive plans influence the corporate decisions to realize self-interest becomes a focus of present research.From the perspective of dividend policy which is paid full attention by regulators and investors,this paper investigates managerial opportunism with stock incentive plans and its economic consequences.So far,a small amount of domestic literatures examinedhow the stock incentive plans impact on the level of dividend distribution,however,these literatures based on the non-vested data,limited research term brought about deficient general results,and remained the following important questions to test:whether the stock incentive plans itself,such as stock incentive tools,granted objects,granted quanties and other key elements of contract would impact on managerial opportunistic behavior?In addition of dividend level,will the stock incentive managers affect other aspects of dividend policy?How much will the managers opportunistic gain from the stock incentive plans and how does managerial opportunism affect the companies?Research on those questions can rich literatures of managerial dicisions with stock incentive plans,can reveal the existing problems in the granting and implementation of stock incentive plans,and help to put some targeted suggestions for optimizing stock incentive contract design and intensifying the stock incentive system.Base on the above analysis,this paper selects a complete cycle of stock incentive samples(awarding,partial vesting,end of vesting),combines the key elements of stock incentive contract,and analyzes managerial opportunism of dividend distribution and its economic consequences.Specifically,this paper firstly inspects how the managers with stock incentive affect the dividend level,by applying PSM model,this paper can alleviate sample selection which has not yet considered by the existing literatures,then discusses how the key elements of stock incentive contracts,the managerial opportunistic motive and managerial ability affect dividend level.Secondly,this paper inspects whether the stock incentive managers will opportunistically prefer among dividend channels,this paper analyzes stock price effect's difference,then test whether the manager would have a preference among dividend channels according to their stock price effect's difference.Thirdly,test the relations between managerial opportunism and dividend smoothing by constructing dividend smoothing variables and multiperiod DID model.Finally,this paper calculates the managerial opportunistic gain from the phase of vesting,and tests how the managerial opportunism affects the performance of companies by econometric model and case analysis.The main conclusions are as follows:Firstly,the managers opportunistically design the key elements of incentive contracts which make the contract incompletely,providng convenience to amplify stock incentive gains by dividend policy.This paper finds that the dimension of performance-vest indicators is not a linear negative relationship with managerial opportunism.The self-interest level of managers in the setting of initial strike prices is related to stock incentive tools,compared with stock options,the managers have a higher degree of opportunism in the initial strike prices of stock options.The managers in state-owned companies have a lower degree of self-interest behavior.In the design of stock incentive plans,the degree of self-interest is proportional to the managerial power.Secondly,under the background of dividend protection for the stock incentive plans,managers try to raise the level of dividend payment to lower the grant price or strike price,aiming at maximizing the incentive earnings.Due to the restricted stock incentive managers have the right to obtain dividend,the influences of stock option and restricted stock on the dividend level are different.If the stock incentive plans are more leaning to managers which including the chairmen and general managers,and if the managers are granted more stock options and restricted stocks,the listed companies would have higher dividend level.If the ability of managerial opportunism as measured by the managerial power is stronger,the dividend level is also higher.Thirdly,in an environment that the capital market is lack of efficiency in China,the stock incentive managers try to cater to the investors' irrational preference of stock dividend,prefer choosing stock dividend channel in order to gain the premium of stock incentive tools.Compared with stock options,restricted stock incentive managers have higher degree of preference of stock dividends and cash dividend channel.If the stock incentive plans are more tilt to the managers,the managerial opportunism motivation is higher,and the probability of choosing the stock dividend by the managers is greater.Ability to implement managerial opportunism is proportional to the possibility of choosing stock dividend channel.Fourthly,dividend smoothing which means the change of dividend will lag to the change of profit has the effect of boosting the stock price,thus compared with the non-incentive listed companies,those incentive listed companies have higher degree of dividend smoothing when after they implement the stock incentive plans,which improves that managers try to sustain and raise the incentive earnings by dividend smoothing.We also find that the motivation of managerial opportunism is proportional to the degree of dividend smoothing.The relation between the stock incentive of state-owned listed companies and dividend smoothing is not significant,but when the non-state listed companies implement stock incentive plans,the degree of dividend smoothing rise significantly.Finally,the incentive plans bring considerable wealth for the managers.If take the manager compensation during the reporting period as reference,the managers gain excess stock incentive compensation.By calculating the expect incentive earnings gained by managers of A company and analyzing its economic consequence,this paper draws the conclusions that a company lowers the grant price of restricted stock by dividend payment which provides the convenience for easily obtaining the incentive earnings,and the company is suspected to transfer assets to the managers without considering the benefit of shareholders.In such circumstance,the efficiency of stock incentive plans can't sustain in a long time,instead become a tool of manipulating and encroaching the interests of the shareholders.The innovation aspects of the paper are as follows:Firstly,this paper extends the domestic existing literatures from inspection on the existence of managerial opportunism to all-around research on the motivation,behavior,and consequences,which can rich the application of managerial power theory in China.This paper inpects stock incentives' dynamic impact on corporate performance from the stage of vesting which provides a new perspective for research on long-term effects of stock incentive plans.Secondly,this paper analyzes much systemly on the dividend policy.When the existing literatures focus on the level of dividend distribution,this paper inspects three aspects of dividend policy,level,channel preferences and dividend smoothing.Finally,this paper provides corresponding policy support and reference for Chinese listed companies and regulatory departments.For the listed companies,they should focus on optimization of stock incentive plans from the performance-vested indicators,the incentive tools selections,the granting objects to constrain the managerial opportunism.For the regulatory departments,they can strengthen and enlarge the scope of managerial incentive compensation's disclosure,and also guide the rational dividend distribution of stock incentive listed companies.