Analyzing Of The Stock Options Plan By The Game Theory

The stock options plan is an important component in the incentive system existed now. In the fifties of the 20th century, the first stock options plan appeared abroad. And through more than 50 years' practice and development, it came up to more perfect in the design of every key element, and had already been used widely. However, through analysing the details in the stock options plan of foreign enterprises, we found that there are many deficiencies among them, such as, the design of some key elements is random and is unfavorable to operate. With the reasons such as being unreasonable of the administration structure inside the domestic enterprises, the implementation of the stock options plan in our country is not plain sailing, and its movtivation is weakened to some extent. Because of this, the paper puts forward a new method of using the Game Theory to analyse the stock options plan quantitatively.In the course of the concrete analysis, the paper had adopted different analytical methods respectively to different key elements among the stock option plans. According to the problems existing in the current situation of domestic and international enterprises, the paper chose three key elements: source of underlying stocks, grant target of stocks, the exercising price of stocks to analyse separately.(1) The source of the underlying stocks. Accounting to comparing cost and benefits of the schemes of four kinds of stock sources which our country can implement, the paper regarded an enterprise as the player, and analyzed the enterprise should choose which scheme according to their own conditions;(2) Stock options was given to administration and supervision authorities of enterprises, and now expanded to personnel progressively, so the paper compared between ESOP (Employee Stock Ownership Plan) and ESO (Executive Stock Option, grant to the senior executives mainly) . And which one should be adopted, the enterprise should take such factors (scale of company, fund flow, inside mechanism of management and achievement appraising, etc.)into account.(3) In analyzing the exercise price, the game should include the enterprise and senior executives. In this course, both sides should consider the strategies of each other. If the price is too high, the senior executives will lack the interest and confidence to the stock options; and if it's too low, the senior executives needn't make great efforts to get, and the function of encouragement should not be weakened, andthis will damage the shareholder's interests. Through Dynamic Game and Repeated Game, we can obtain an inequality. Each enterprise enters some relevant parameters to come into a range of the exercise price. The price made in this range can let the enterprise and the senior executives reach to win-win .The paper used the Game Theory to analyse the stock options plan. It had explored a new method in the design of key elements in the stock options. It can partly resolved the random problem. And it makes the stock options plan more effective, and propels the application of the stock options plan in China, and gives play to its encouragement utility in the enterprises effectively.