| Equity-based incentive is one of the most wildly used incentive schemes which aims to unite the nonuniform missions between shareholders and managers. By this incentive scheme,managers are granted a certain percentage of stocks.Being one of the owners of this company,managers would take firm owners' point of view in decision-making process. In such situation,the long-term value of companies increase.Equity-based incentive which originated in the U.S.A is a widely used compensation scheme around the world.However, in China this scheme has just started a decade years ago.Due to the unfully developed of China stock market, the performance of listed companies didn't improve significantly by this scheme.From January 2006,China government has issued several rules and regulations related to equity-based incentive to guide its practice in listed companies. At the same time, the split-share structure reform which happened in 2005 brought an opportunity for the development of equity-based incentive. This scheme was adopted by many listed companies.Since this scheme is widely adopted in China listed companies,it is important to avoid the side effect on the current China stock market.Meanwhile, it is a meaningful topic on how to make better use of this scheme to satisfy the owners of the company.In this essay, the author uses the data from 100 listed companies which adopted equity-based incentives scheme from 2006 to 2008.It aims to study the factors that affected the implement of equity-based incentives as well as the market reaction to its adoption.There are seven parts in this essay. It starts with the introduction of theories of incentives which includes pricipal-agent theory and human capital theory. Followed by the reviews of the history of equity-based incentives, the background of the current incentives scheme is mainly introduced.In the forth part, this paper describes the details of the equity-based incentive scheme in China from the financial characters of the scheme.In the fifth part, the author uses a logitic regression to analyze the factors which affectes the likelihood of a company on adopting an equity-based incentive.It is found that, the ownership structure,the proportion of directors,independent directors,growth opportunity and the asset scale indeed affects it significantly.In the sixth part, the author continues to analyse the market reaction of the adoption.The result shows that the public agree with the adoption of equity-based incentive scheme, and the cumulative abnormal return is significant in the day of announcement and the CAR, is more positive in non-state-owned enterprises.Finally,this paper summaries the full text, followed by some recommendations according to theoretical and empirical analysis. |
