Research On Equity Incentive And Performance Effect Of The Listed Companies

Since the reform and opening up, especially since the 90s of last century, China's capital market has made considerable progress. Listed companies in different industries increased year by year, from 1992 to early 2011, eighteen increased to two thousand. With the continuous development of China's capital market and the accelerating of the pace of opening up, the governance structure of listed companies are maturing. The concept and specific operation of equity incentive which come from Europe and the United States and other developed capital markets are also increasingly being recognized and accepted by majority of listed companies.In China, Shenzhen Vanke was the first corporation to launch the equity incentive programs in 1993, after ten years of development, equity incentive has become an important way to solve principal-agent problem in a listed company in China. Especially in recent years, more and more listed company launched equity incentive program. In this background, the status and the effect of implementation of equity incentive are given empirical research in this paper.This paper first reviews previous classic literature and research results which related to the field of equity incentive, and draw their own understanding. Then, this paper explain the concept of equity incentive, introduce the use of equity incentive mechanism to do and incentive models, and describe the theoretical basis of equity incentive, such as principal-agent theory, human capital theory, the enterprise theory. Based on those theories, this paper analyzes the status of implementation of equity incentive in listed companies in China, and the characteristics of equity incentive are sub-annual, sub-sector, sub-regional statistical analyzed. Equity incentives as an way of incentive, the ultimate function should be reflected in improving performance of listed companies. In the research of previous literature achievements, this paper select the 43 listed companies which have implemented equity incentive, and matched samples, use the ROE and the OPE as the dependent variables, the equity incentive as the explanatory variable, then use partial least squares model with dummy variables to empirical research. Aim at revealing whether equity incentive actually improve the performance of listed companies. Subsequently, this paper applies the same set of data and the same set of explanatory variables, empirical research on the company's performance under the least squares regression. In addition, two methods are compared and verified.By empirical studies of Econometric Model, draw the following conclusions:the coefficient of equity incentive is positive; to some extent, it can improve the company's performance indeed, but the effect is not significant. The reason are mainly based on the the weak efficiency of the validity of stock market, equity incentive's time limit of listed companies, the listed company's equity incentive program and the system is imperfect, immature; at the same time, the regulatory system and the relevant laws and regulations of equity incentive are still in continuous improvement. It is for these reasons, the equity incentive effect has not been given full play, affected its function in enhancing the performance of listed companies. In addition, partial least squares and least squares have their advantages and disadvantages.Finally, this paper will present the recommendations of equity incentive, the outlook and precautions in the implementation of equity incentive.