The Research On The Correlation Between The Executive Stock Option Incentives And The Operating Performances Of Listed Companies In China

The basic target of the listed company is to maximize the shareholders'wealth, but in listed company the shareholder of proprietor and operators will entrust each other because of the target benefits inconformity, information dissymmetry and responsibility risk inconformity acts, so obstruct the target being come-out. In order to solve the principal-agency problem, we need to have a set of incentive and restraint mechanisms. The stock option incentive in the listed company gives operators ownership of a share, will having the stock price of company to put together with the operators'acquisition guerdon, stimulating them to maximize shareholders'wealth and social value. The mechanism of stock option incentive has been greatly promoted by the split share structure reform launched in May,2005 in the securities market in China. With the carrying on of the shareholder structure reform and the promotion of the capital market, more and more executives of listed companies holding their company's shares, and people pay more and more attention to the research on the relationship between managerial ownership and performance of companies.This thesis is based on discussing and dissecting theoretical basis and practice effect interrelated with stock option incentive, using empirical research and comparative analysis method, combined with shareholder structure reform and executive ownership practice, to study the relationship between managerial ownership and performance of companies. In the empirical research, we study the listed companies with stock option incentive until September 30th 2009, choose their financial statements of the third quarter as the sample. Then we use the ROE as the company performance specific measure, with the company size, the total assets turnover and the asset-liability ratio as the control variables, analyze the relationship between the stock proportion of the listed company executives and ROE.The results have shown that there is a significant positive correlation between the equity ratio of listed company executives and the company operating performance. It may be due to the following reasons. The split share structure reform improves the financial markets, and the newly revised"Company Law"in the capital system ,repurchase shares and executives during their term of office areas such as transfer of shares has been a breakthrough in enhanced adaptation of listed companies market autonomy and flexibility. Based on the findings above, the stock option incentive can improve the company operating performance during the financial crisis. The thesis suggests: improve the national regulatory mechanisms; complete the laws of stock option incentives; strengthen the independence of supervision committee in listed companies; improve the performance evaluation systems of listed companies.