The Selection Of Equity Incentive Modes

With the continuous development of China’s securities market, more and more listed companies choose equity incentives to improve their performance, especially in the era after share-split. As the practice of equity incentives goes further and the relevant laws and regulations become more mature, the equity incentive modes and the accounting for stock-based compensation has become an important study theme both in academic and practice field.This paper discusses the different equity incentive theories、equity incentive mode, and the main accounting regulations for equity incentives. On this basis, the status of the implementation of equity incentive plan in China is firstly introduced from the aspects of the industry distribution、incentive program content, the listed companies’asset size and net profits; Then a statistical analysis of equity incentive fair value to total assets ratio in order to explore whether there is a significant effect on the annual reports of listed companies; followed by a more detailed description of our current equity incentive accounting treatment rules, including the equity-settled share-based payment and the cash-settled share-based payment. There are case studies for both share-based payments which are Vanke and Shanghai CIMIC. Again, this paper establishes an empirical study to find the impact of equity incentive patterns on the annual reports among listed companies and the sample includes36listed companies during the period from July1,2005to31December2010. The empirical study comes to a conclusion that the equity incentive fee has a significant impact on the net profits of listed companies. Further more, it shows that the restricted stock’s impact on the listed companies’ net profit is more significant than the stock options. Finally, the paper concludes the different features and adaptation of the equity-settled share-based payment and the cash-settled share-based payment, summaries the restricted stocks and the stock options, and provide advice on the implementation of equity incentive for listed companies from a financial accounting point of view. There are also author’s expectations in the end of this paper.The significance of this paper is that it explores the impact of different equity incentives to financial report of listed companies from the accounting angle in order to find the best-suited equity incentive mode to different kinds of listed companies.