Free Cash Flow,Agency Cost And Choice Of Equity Incentive Plan

Equity incentive system as a important innovation of incentive system, to reduce the agency costs between the owner and operator, enhance the value of the company and promote economic development plays an important role.It have been confirmed in practice by Western developed capitalist countries. Compared to the great success and widely used abroad, in our country equity incentive system started late. Equity division reform has solved the major institutional defects restricting the development of China Capital Markets in2005, for the implementation of equity incentive clearing the system barrier. In recent years, along with the relevant laws and regulations to the equity incentive system, down the path of standardization of equity incentive system in China, however, equity incentive plans of listed companies in our country, especially state-owned companies in the implementation of the proportion is relatively low, making the good long-term incentive mechanism cannot contribute to enhance the value of listed companies and promote the economic development in our country. Scholars has research on the economic consequences of free cash flow and the influence factors of equity incentive, but combine the two and consider the influence of corporate governance mechanisms is very few. Based on the above paragraph, it have a certain significance to study the relationship among free cash flow, agency cost and the choice of equity incentive plan,as well as the influence of corporate governance mechanism by both normative and empirical research.In normative research part, Related research results in and abroad were reviewed, sorted and summarized.The related theories were summarized and the relationship among free cash flow, agency cost and the choice of equity incentive plan was analyzed together with theories, which provide a strong support for the design of the empirical research model.In the empirical research part, taking A-share listed companies data from2006to2012as study objects. First of all,the descriptive statistical analysis and correlation analysis was carried out on the sample data. Then, the whole sample and state-owned companies samples for multivariate LOGISTIC regression analysis. Draw the following conclusion through comparative analysis:(1) the more free cash flow of listed companies, the less inclined to choose equity incentive plan, for state-owned companies, companies in areas of low degree of marketization and the non-duality companies, the more free cash flow, the less inclined to choose equity incentive plan.(2) for state-owned companies, the low degree of marketization, low board independence and low equity balance degree, the more free cash flow, the less inclined to choose equity incentive plan.Based on the above research results, we can get the following enlightenment:accelerating the process of marketization, cultivating professional manager market, bring into play the function of bank creditor governance, deepen the reform of the state-owned company organization relationship, strengthening the information disclosure mechanism, the mandatory cash dividend, perfect the internal governance structure.