Validity Study Of Listed Companies In The Equity Incentive Plan

This paper recollects the results of the predecessors from two different angles, which are stock structure and the effect of Equity Incentive Plans. In the background of Reform of Non-tradable Shares, the paper studies the signification of Equity Incentive Plans of Listed Companies. The paper describes the affect of Equity Incentive Plans to the enterprise from two sides and cites the model of moral risk of Information Economics and gets the result: directors should get the stock for stimulation. After this, the paper discusses the standard of the Equity Incentive Plans. Net asset is considered to be the most important standard of the Equity Incentive Plans. Also, net income, Net asset earning ratio and the Ratio of assets to liabilities to be other standards to judge the effect of Equity Incentive Plans. Besides these, the price of stock is another standard of market. In the end, the paper cites the Microsoft Corporation, Vanke Corporation and Enron to discuss the affect of the Equity Incentive Plans. Then the paper gives some suggestions. Firstly, Listed Companies should concern the net asset as the most important standard to judge the effect of Equity Incentive Plans. Secondly, Balanced Score Card is a good way to judge the operation of Listed Companies. Thirdly, Listed Companies should make time limit of Equity Incentive Plans longer. Fourthly, Listed Companies should establish the mechanism to avoid moral risk.