The Empirical Analysis On The Influence Of Stock Incentives To Performance Of Listed Companies

It has been years since western countries started to do research on the influence ofstock incentives to company performance. It has formed an integrated scientific system.However, domestic research started recently from1990s. Due to under-developedstock market, unique historical factors and social background, our domestic listedcompanies didn’t have sufficient conditions to implement stock incentives. Equitydivision reform started in2006promoted the development of capital market whichprovided wide room for stock incentives. During the period of equity division, thedifference between outstanding stocks and non-tradable stocks is that stocks havedifferent rights. Equity division reform was to resolve this problem, refusing bigstockholders from occupying mid or small stockholders’ benefit. By the end of2006,the equity division reform has completed. All stocks have circulated in the market.Based on this background, this thesis tries to describe China’s stock incentives’status in quo and discover the relationship between stock incentives and companyperformance through normative analysis and regression analysis. The research is basedprimarily on agent theory.Summarizing and analyzing previous research, this thesis finds that stockincentives as a means of incentives which company owners give to managers caneffectively release the agent cost, and make company owners and managers share thesame benefit. The ideal effect is to let managers become company’s owners in order toreduce their perquisite consumption and benefit expropriation. The purpose of stockincentives is to maximize each party’s benefit.However, subject matters of stock incentives include stock options, restrictedstock, stock appreciation rights, phantom stock, etc. Deciding to use which kinds ofstock incentives is always a heated question in theory field. Simultaneously, as thedifference of incentive shares, people still wonder by how many shares of stockincentive can reach the greatest benefit for both sides. Based on what mentioned above,this thesis implements regression analysis to sample companies selected from listedcompanies in Shanghai and Shenzhen stock market from the period of May,2006to December,2010. Principal component analysis and least square method are used inprocessing data. Financial index is separated to calculate V value as the dependentvariable of the regression analysis. The independent variable is the proportion of sharesused as incentive divided by the total shares. The regression analysis also introducescontrol variables. It has been found that stock incentives and company performancehave a positive correlation. This thesis further researches on the different performanceof stock option and restricted stock. This research rejects sample companies which useboth stock option and restricted stock as incentives. It has been shown that theperformance of stock option is better than restricted stock. Meanwhile, this thesisanalyzes the region effect. The result shows there is regional effect in stock incentives.Proportion of [10%,15%] shows the best effect of incentive.The final part of the thesis comes up with advices and defects of writing.