Study On The Effect Of The Implementation Of Executive Stock-based Incentives By Chinese Companies

Since the 80's of the last century,western countries,especially America,took the stock-based incentives as an important way to solve the agency problem and maximize the shareholder value.With the equity diversion reform completed and "Public Companies Stock-based Incentive Management Measures"(implemented from 2006.1.1) released,there were more and more Chinese companies started to use the stock-based incentives.Because of the huge difference between western countries and our country,whether the stock-based incentives had the same effect was under discussion.The scholars of China who studied the effect of the implementation of executive stock incentives mainly focused on the accounting performance,and there are still different opinions on this subject.Under the background,this paper is trying to do some deeper research into the effect of the implementation of stock-based incentives by regression analysis study and event study,which includes three aspects:agency costs,profitability and growth,market reaction.From the regression analysis,we know the equity incentive proportion of the executive payment has a better effect on agency problem,the ESO propotion of the total share has a significant correlation with the eps,but many hypothesises are rejected;From the event study,it shows the market reaction is obvious,when announce to start the incentive plan,the companies will have a positive AAR,when announce to end the plan,there will be a negative AAR,and the investors have a preference for stock option over restricted stock.Based on the above results,this paper analyzes the reasons,and makes strategic suggestions accordingly.