The Analysis Of Executive Stock Options Mechanism And The Application Research

AbstractExecutive Stock Options(ESO) is a main managers remuneration motivation mechanism in many developed markert economiy countries in western . It has special and high effective advantages in mending the firms governance,stabilizing important employees,improving the performance, and can motivates executives to play the important role in the long-run. Though, there is not real ESO mechanism and applications in China today. To research the ESO mechanism deeply and design scientific and feasible ESO plans is a very important project to economists and enterprises. Based on the Principal-Agent theory,incentive and constraint theory,residual right theory and the property right of human capital theory, the author presents a mathematical model to compare the tranditional motivation mechanism with the ESO, points out the paucity of motivation of fixed salary and yearly salary in the long-run,but the ESO plan can hurdle the issues; gets a better scope it contains the optimal exercise price of ESO plan; introduces the stock option into the Principal-Agent model and analysis it, gets some results that the executives will take more risk when they are risk-adverse, the risk will changes higher or lower when the stock reperchasing,vicious stock price controlling of institutional investors and other similar actions happened. Furthermore, the essay gives some feasible methods in ESO plan applications,describes the problems and obstacles in the ESO plan operation and also gives some policies and advice on the ESO plan operation.