The Effect Of Executive’s Equity Incentive And Its Influential Factors

Compared with developed western countries. China’s equity incentive system introduced later, faced with the incomplete relevant laws and regulations, complex economic environment and immature capital markets which are different from the Western developed countries. How the effectiveness of incentive stock options of the list companies in China and what the factors that affect the effectiveness of the equity incentives of listed companies in China are worthy to study. There are sorts of defects and limitations in the relevant research. In this context, this paper uses innovative methods and new perspective to study the effectiveness of the equity incentive and the factors that influence the effectiveness of the equity incentive.In the empirical test on equity incentive efficiency, this paper makes comparison and improvement on the methods of the previous comparative analysis. It thinks there are three factors must be considered when choosing the indicators of the effectiveness of the equity incentive. Through three different financial performance indicators of the effectiveness of the equity incentive, we found that the company’s management to manage earnings is not to meet the requirements of performance evaluation indicators in the equity incentive plan but in order to smooth the financial performance of the company, so as to achieve long-term performance evaluation indicators. The company promulgate equity incentive plan because the executives is aware of the company’s developments in a large extent and know the probability of achieving the performance evaluation indicators, therefore equity incentives is a reward for the executives.About the factors affecting the effectiveness, this paper not only taking into account the company’s growth opportunities, capital structure, executive power, corporate governance and firm characteristics factors, but also taking into account a new perspectives that financial evaluation index factors from the equity incentive plan. This paper attempts to form the following characteristics and innovations in the three aspects of the theory, research methods and perspectives:First, Proposing standards of financial indicators to measure the effectiveness of the equity incentive. Second, the adjust method of financial indicators of the effectiveness of equity incentive. Third, the innovation research perspective of impact factors of the equity incentives effectiveness.