The Empirical Study On Performance Of Incentive Of Stock Options

The stock option is a kind of incentive system appeared in the middle of 20th century. It matches the power of surplus control with the power of surpluses share mutually by executive's participating the surplus share. It resolves effectively the problem of Client-Agent and makes executives incline to maximizing shareholder's benefits. That is why that stock option enjoys panegyric when it appeared. Many enterprises adopt it in succession in a lot of counties in around the world. In China, stock option was also imported in 1990's. Meanwhile, there have been a lot of articles on how to design, improve and extend the implement of stock options in literature. However, considering the present development stage of Chinese economy, one may doubt this kind of incentive mechanism can bring the same satisfying result in Chinese practical environment just as it does in the west. As we know, although equity incentive mechanism theory has been well developed, its application situations in China would be quite different from its western counterpart.Based on our empirical study, we find that incentive of stock options does not achieve its original objectives that it may could. The major reason for this may due to the shortness of the corresponding necessary conditions of its implementation in china. For example, there is not any efficient intermediate market, the underdevelopment of monitoring rules and institutional regulations, the incompleteness of corporate governance structure and the weakness of Chinese capital market. Among these, the weakness of the capital market has significantly restricted the probable influence of the implementation of equity incentive mechanism. Actually, to some extend the implement of equity incentive mechanism may have terrible negative effects on Chinese capital market.This paper is composed of five chapters and logically can be divided into three parts. In the first part, we have a comprehensive review of the literature in this field and go over the fundamental theory of equity incentive mechanism...