ESO Exercise Price Revise And Apply Research

December 31, 2005 securities regulatory commission published Listed Companies Incentive Management Approach (piloting), that bring great enthusiasm for implementing equity incentive. A-share market has 122 companies launch equity incentive and which has 28 companies being implemented. At present, 6 companies get allow by general meeting of shareholders and other 88 companies cannot be allowed and just be stage of plan.The corporate governance structure improved gradually, after non-tradable shares reform and clearly identified property rights. So it provide property circumstance for the use of ESO (executive stock option).However the incitement effect of ESO is weakened, because capital market have lower effective and huge fluctuations. And we know exercise price of ESO decide its effect.So this paper focus on exercise price, first, we analysis the necessary of exercise price revise from different aspects; then find question from literature from home and abroad. To resolve the problem, we revise the traditional model about exercise price by introducing weighted average revise index and over-performance grows rate. Then we analysis the ESO value of revise model by Fischer-Margrable, that provide reference for accounting value assessment. And we introduce the process of the ESO value of revise model by example. At last we definition incentive income and analysis the different between revise model and traditional model at the way of exercise price by applying empirical analysis. And for getting better incentive affect we advice that we should apply revise model at ESO.