The Research On Effects Of Equity-Based Incentive Plan Of Listed Companies In China

The primary goal of equity-based incentive plan is to solve the principal-agent problem between shareholders and management, and to align the interests of management with those of shareholders so as to incentive the management to improve the performance of the company and to maximize the shareholders’wealth.In 1990s, there were some similar equity-based incentive plans in china, such as Shanghai model, Wuhan model and Beijing model. And then, the govement practiced the equity-based incentive plan in some oversea listed companies, such as Netease. After the non-tradable share reform, more and more laws and codes that related to equity-based incentive plan were enacted by the government, and consequently the equity-based incentive plan was practiced by lots of A share listed companies.The paper analyses the effects of equity-based incentive plan in the perspective of theorical analysis and empirical analysis, respectively. Consequently, the methodology of the paper combines the game theory, event study and econometrical regression analysis. In the first part of the paper, it simply introduces the background, the significance and the research method of the paper. And then, the paper describes basic concepts, primary forms and the history of equity-based incentive plan. After that, it reviews the theoretical and empirical study literature, reslectively. Then, the paper introduces the exploration of equity-based incentive plan made by oversea listed companies and A share listed companies. In succession, the paper presents the newly enacted laws and codes relating to the equity-based incentive plan and analyses the status quo of equity-based incentive plan of A share listed companies after the non-tradable share reform. Based on the analysis above, the paper analyses the effects of the managers’appointment by the government, the non-perfect managers market and the company’s gift on the equity-based incentive plan in geme theory. In the following chapter, the paper adopts the event study to analyze the effect in announcing the equity-based incentive plans by companies that have completed the non-tradable share reform. Also, it investigates the differences of effects between main board and small & medium enterprise board. In succession, the paper reaearches on the effects of equity-based incentive plan as the performance measured by ROA and Tobin Q, respectively. Then the paper analyses the experimental study outcome in detail. At last, the paper makes a summary of the all analysis, and gives the suggestion.