Research On Factors About Stock-based Incentives Used By A-share Listed Companies In China

Stock-based incentives have been implemented in our country for a decade. Prior to the split share structure reform, there existed several stock-based incentive models, and the laws and regulations were not perfect. But after the reform, especially after the implementation of"Listed Company's Stock-based Incentives Management Approach"on 2006, Jan 1st, Stock-based incentives entered a standardized period of development in our country. This paper has studied the data of all A-share listed companies which using stock-based incentives since 2006, Jan 1st. The matching samples which are not using stock-based incentives have been selected from A-share listed companies, with a ratio of 1:5 in quantities. The target of this paper is to find out the key factors impacting on using stock-based incentives by A-share listed companies in our country.75% of the A-share listed companies which using stock-based incentives chose the stock options, and 22% used restricted stocks. Only 2 listed companies issued stock appreciation rights to their managers, but they also used stock options or restricted stocks. Therefore, this article set all the samples into two groups, one is using stock options, the other is using restricted stocks. I chose the matched samples to each group, which are not using stock-based incentives. In order to find out the key factors, I tested eight factors which are growth, liabilities, cash flow, pre-performance, managers'age, managers'cash compensation, stock concentration and corporate nature, representing the company's financial character, corporate governance and corporate nature. Then, I also changed the indicators of growth, cash flow, corporate performance, stock concentration for further test. In addition, I tested the relation between managers'share-holding rate and using stock-based incentives as many scholars abroad did.The results showed that companies with a high growth, good pre-performance, younger executives, lower equity concentration, and the corporate nature is private are more likely to use stock options. While companies with lower liabilities, lower equity concentration, and the corporate nature is private are more likely to use restricted stocks. In addition, comparing the target samples and the matching samples, this paper also reached the following conclusions. Companies using stock options usually have lower liabilities, better cash flow, more cash compensation to executives, and higher executive stock-holding rate. Companies using restricted stocks have the following characters, such as higher growth, worse cash flow, executive higher cash compensation and lower stock-holding rate. But the regression results of the variables are not significant. In order to fix the lack of empirical study to stock-based incentives in China and the lack of study in restricted stocks, I explored the key factors of A-shared listed companies using stock-based incentives in our country. I also separate the samples into two groups, one is stock options and the other is restricted stocks, to find out the key factors of each incentive modle. The findings in this paper will provide an important reference to companies preparing to use stock-based incentives.