Executive’s Behavior In The Equity Incentive Scheme

In recent years, the Incentive effect of equity incentive scheme has been accepted by researchers, so some researchers think that the executive has work hard for maximizing the wealth of owner. But with the development of the research, some researchers find that executives get benefits for themselves through the equity incentives scheme. Do executive work hard for maximizing the wealth of owner or get benefits for themselves through the equity incentives scheme in china? What is the feature of executive’s behavior in the equity incentive scheme? Which factors influence the behavior of executive? To answer these questions, first this paper studies the relationship between equity incentive and the performance of company. The result is that equity incentive just with ROE which is easy to be manipulated by executive shows significant positive correlation. But there is no significant positive correlation between equity incentive and EOE which is not easy to be manipulated by executive. That means executives get benefits for themselves through the equity incentives scheme. Second, in order to study the feature of executive’s behavior, this paper describes the characteristics of index which assess the executives. We find that:the number of the index is too little, just one or two; most of the index is about profit; the index is vertical comparison. And the term is too short. Third, this paper studies the factor which can influence the behavior of executives. At the last of this paper, we show our suggestions.This article is divided into six chapters, the main content of each chapter as follows:Chapter one. IntroductionIn this chapter this paper introduces the background and significance of the study, expound the research methods and research ideas and the framework of this paper.Chapter two. Literature reviewIn this chapter we review the research on equity incentive. There. is no consistent conclusion about equity incentive. Some people hold the idea that through equity incentives can make the interests of executives more together with shareholder, so they think that Executives behavior is inventively. But the other people think that equity incentives do not reduce agency cost, it is one way for executives to get their own interest. So they think that Executives behavior is self-interested. At the last of this chapter this paper gives some suggestions about the questions in Existing research.Chapter three. Theory analysisIn this chapter we introduces some concept and theory, discusses the principle and effect of equity incentives. At the last of this chapter this paper introduces the background of Equity incentives.Chapter four. Hypothesis, variables, design,First, According to the above discussed, this paper put forward three hypotheses. The first hypothesis is about the relationship between equity incentives and the performance of the company; the second hypothesis is about the feature of executive’s behavior and the third is about the relationship between executive’s behavior and corporate governance. Next, this paper introduces all variables which will be used in the models. And the third, this paper designs two models to proof the first and the third hypothesis. Through theoretical analysis this paper proofs the second hypothesis.Chapter five. Empirical analysesAt the beginning of this chapter this paper test the relationship between equity incentives and the performance of the company and find that equity incentive just with ROE which is easy to be manipulated by executive shows significant positive correlation relationship. But there is no significant positive correlation relationship between equity incentive and EOE which is not easy to be manipulated by executive. That means executives get benefits for themselves through the equity incentives scheme. In order to proof the second hypothesis, this paper analysis the feature of the index. At the last of this chapter this paper test the relationship between executive’s behavior and corporate governance and find that whether the management has shares and executives behavior shows significant negative correlation relationship. That means the more of the managerial stockholding the more of the self-interested behavior. Also, there is significant positive correlation relationship between the proportion of independent directors in the board of directors and the executive’s behavior. That means the greater of the percentage the greater of the Incentive behavior.Chapter six. Conclusion and suggestionAccording to the theoretical analysis and empirical test results. This paper gets its conclusions and based on these conclusions, this paper give its suggestions.