Effect Of Equity Incentive Of Listed Companies

With the changes of the modern enterprise system and the development of a knowledge-based economy, more and more enterprises implement equity incentive in order to attract and retain qualified personnel, and make the managers’ full potential enhance corporate value. From the1950s, equity incentive, as a way to solve the agency problems and improve the enterprise value of the incentive mechanism, and in Western countries, widely used in the United States. Equity incentive system in China started late. In the early1990s, China began to introduce equity incentive. In2005before the split share structure reform in China, executives equity incentives in listed companies in China has been in to try and exploratory stage. And there are no relevant laws and regulations specifically for the introduction of incentive stock options. January1,2006,"the listed company equity incentive Regulations (Trial)"officially implemented, which provides a legal guarantee for equity incentive in the listed company. December6,2006, the SASAC issued "state-owned holding listed companies (domestic) implementation of equity incentive pilot scheme ", which laid a legal foundation for the implementation of equity incentive. From current study in China, the majority of scholars make empirical study on the effect of equity incentive implementation, but there are also large differences on the relationship between equity incentives and the business performance.This paper mainly draws the research achievements at home and abroad in the development and implementation of equity incentive, and makes research on the effect of equity incentive in China’s listed companies. In this paper, the main research methods are combining standard research and empirical research, and at the same time using comparative analysis, statistical analysis to study equity incentive whether can play incentive effect at the present stage.This paper is divided into six parts:The first part is an introduction; The second part is Systematically introducing the related literature at home and abroad; The third part is making a statistical analysis on the equity incentive in listed companies in China; The fourth part is the analysis of equity incentive, which can bring positive and negative effect; The fifth part is the most important part, which makes an empirical research on the relevance between equity incentive and business performance, and does further comparison between the business performance changes before and after the implementation of equity incentive; The last part is conclusions and recommendations.In this paper, the empirical research found:Executives equity incentive plan of listed companies in China has a significant negative effect on business performance. It means that the equity incentive plan generally does not motivate managers strive to manage the enterprise and create value and wealth for shareholders. Further analyze before and after implementation of equity incentive data to draw a conclusion, equity incentive does not play a stimulant effect on the performance of listed companies, and due to the existence of the cost of equity incentive, the business performance decreased after the implementation of equity incentive.In summary, this paper makes key research on equity incentive theory, design elements of incentive stock options, and equity incentive effect, and so on. By empirical test confirmed that equity incentive does not improve business performance at this stage of China’s listed companies. This paper argues that the effectiveness of equity incentive to play does not only need to have good internal corporate governance mechanisms, also need efficient capital market as a precondition to establish, and on the basis of internal conditions and external market conditions, build effective equity incentive assessment mechanism.