Based On The Research To The Influential Factors Of Enterprise Life Cycle Theory Of Equity Incentive

As a long-term incentive mechanism to solve principal-agent problem, Manager’s equity incentive enters a standardized period of development in our country by years. The relationship between its performances of the company and influencing factors is the major study of incentive stock options. The existing researches about the factors of the impact of equity incentive plan take enterprise as whole and static ones. But like other organisms, enterprises also have the life cycle. As companies in the specific enterprise life-cycle which impacted by their characteristics of the business strategy and financial aspects, agency problem between shareholders and managers also different, which have an impact on whether implement the equity incentive. So, based on the corporate life-cycle theory, this paper has studied the date of all A-share companies which used stock-based incentives between2006to2010.the matching samples which are not using stock-based incentives have been selected from A-share listed companies, with a ratio of l:lin quantities. The target of this paper is to find out our country’s companies’key factors impacting on using stock-based incentives in different life-cycle.The paper firstly sorted out the basic theory of the managers’ equity incentive and the enterprise life cycle theory, cleared and defined the stages and the features of the enterprise life cycle, then adopted the quantitative financial method. Finally, we set the entire sample into two groups, one is at developing stage, and anther is at developed stage. Then, we tested several factors which are equity concentration, equity balance degree, the ratio of state-owned shares, the proportion of independent directors, the rate of revenue growth, return on net assets, free cash flow, the level of risk, degree of industry competition, managers’ share-holding rate and managers’ cash compensation by regression, representing the company’s governance structure, firms’ characteristics and executives characteristics.The results showed that companies in developing stage, with lower ratio of state-owned shares, higher return on net assets, lower rate of revenue growth, good managers’ cash compensation are more likely to use equity incentive and companies in developed stage, with lower ratio of state-owned shares, higher return on net assets and higher rate of managers’ share-holding are also more likely to use equity incentive. What’s more, equity concentrations, equity balance degree, free cash flow, and so on, are related to equity incentive, but the regression results of the variables are not significant.The main innovation of the paper is that we research the impact of equity incentive factors from the perspective of the company life-cycle by phases. Research conclusions of this paper enrich the study of relationships between corporate life-cycle and incentives, and will play a role as supplement and guiding on the theoretical and practical.