The Research On The Relationship Of Executive Long-Term Riskly Incentive Mechanism And Corporate Performance

Generally speaking, in modern corporates, the compensation of managers is diversitive. It includes fixed income and riskly income, and contains cash earning as well as future revenue, such as stock ownership, stock option and pension. Establishment of a reasonable executive incentive system can restrict executive behavior, then incent to maximize capacity. It is the core content of an effective corporate government. Now, it is one of the sixty-four-dollar questions that relate the state-owned enterprises reform. Under the circumstance of executive incentive mechanism, this paper emphasizes the influence that executive long-term riskly incentive mechanism exerts on corporate performance with analysis of executive stock ownership and executive stock option. And also tries to find out: What effect will be generated after the implement of executive long-term riskly incentive? How executive stock option impacts on manager's long-term behavior, and whether or not it can conbine interests of shareholder with revenue of managers? How to perfect the executive long-term riskly incentive mechanism?At first, we analyze how executive stock ownership would affect corporate performance, such as payoff ability, growing ability and capital expand ability. The evidence from the model regression and correlation analysis demonstrates that, on one hand, stock ownership has a positive effect to enhance corporate payoff ability and capital expand ability, and then will advance the corporate government performance; on the other hand, our actual stock ownership incentive mechanism can't combine interests of shareholders with revenue of managers. It just a welfare compensation and can't exert the expected incentive effect.Secondly, after researching the relationship between executive stock option and corporate performance, we suggest that executive stock option incent managers'long-term behavior and affect the attitude of risk, and then incent managers to increase the leverage in order to advance performance. By using Jensen and Murphy (1990)'s model, we find there has a significant positive relation between the change of shareholders wealth and the change of stock option value. This demonstrates that stock option can combine the managers'revenue with shareholders wealth effectively. However, there exists the"incentive lacking"phenomenon because the samples all apply the traditional fixed stock option mode.