Influential Factors Of Equity Incentive

The Separation of ownership and management is the charateristics of modern enterprise, and causing the conflict of interest between stockers and managers. By the way granting a centain number of share to managers, equity incentive can motivate the activity of managers, and combine the benefit of stockers, enterprise and managers, to realize the maximum value of the firm.With many decades development, the equity incentive in Europe and USA developed many theories and pratical experience.The equity incentive started later in China, but with the development of our secrurities market and the seccess of the split share structure reform, the equity incentive got more attention from firm, government and Academics.The domestic research papers analyze the equity incentive from two aspects: one is the relationship between the equity incentive and the performance of the firms; the other is what the determinants of the equity incentives are and how they detemine the equity incentive level. Most of domestic research papers analyze the latter using one year data, the conculsions are unstable. We use the panal data from 1999 to 2006 analyze the the determinants of the equity incentives, with the split share structure reform.At first, we reviewed the theoris about the equity incentive and the related literature domestical and oversea. Secend, we reviewed the development of the equity incentive domestical and oversea, with the split share structure reform in China. Then we analyze he determinants of the equity incentives by two steps. Our conclusion is that firm size, firm risk, free cash flow, legal enviroment and the split share structure reform are determinants of the equity incentive, the growth opportunity, the performance of firm, legal environment and the split share structure reform are determinants of the new equity incentive.