A Study On The Effect Of Shareholder 's Control Rights On The Effect Of Equity Incentive

According to the principal-agent theory, incentive mechanism is the basic way to solve the problem of agency between management and shareholders, but as a kind of typical long-term incentive equity incentive mechanism has been widely used in foreign countries. Equity incentive make management been the shareholders of the enterprise, it can tie the interests of the management and shareholders together, and make them become a community of interests. This system is not only pressure for managers but also power. On one hand, if managers want to share the profit with shareholders due to the upgrading of the business value, they have to stand in the perspective of shareholder to consider the issue, and this virtually equivalent bring a "golden handcuffs" to managers. On the other hand, if managers can enhance the value of the company through their own efforts, they can achieve the goal of sharing revenue. Equity incentive policy has been able to stand out in a number of incentives because it is different from the traditional incentives, not only because it helps to overcome the "internal control" runaway problem, but also due to it can avoid the managers only concerned with the short-term interests and ignore the long-term development of enterprises. So it helps to improve the performance of the company and increase the value of the company. Western countries have verified the implementation of equity incentive to improve the company’s performance, but because of our country’s special conditions and other institutional problems, equity incentive’s impact on the performance of company has yet to reach a unified conclusion. With the completion of the split share structure reform and continuous improvement of our country’s capital market, equity incentive as a long-term incentive, its external condition has already implemented in China. In recent years, an increasing number of listed companies have implemented equity incentive. From2009to2012, the number of listed companies that declared equity incentive showing a rising trend. And there are141listed companies declared the implementation of equity incentive in2011. This explains a rapid development trend of equity incentive in China. However, some of these countries announced that they would stop the implementation of equity incentive or due to all kinds of reasons or they got poor implementation effect. In view of this, this article attempts to analyze the possible causes of poor equity incentive effect through the environment of company, especially through the perspective of the major shareholder’s control. The paper expected to provide empirical evidence for different types of listed companies when they are able to use equity incentive program. On the normative analysis, firstly, this paper has done theoretical analysis of equity incentive, the control of major shareholders and the effect of equity incentive on the basis of the literature review; then describes the relationship between the managerial ownership and the effect of equity incentive in considering the control of major shareholder through integrated use of the corporate government theory, agency theory, human capital theory and incentive theory. Finally, the paper has done theoretical analysis of the effect of equity incentive through exogenous perspective and endogenous perspective. Exogenous perspective including convergence of interests hypothesis, Managerial entrenchment hypothesis and interval effect hypothesis. Endogenous perspective is concentrate on company’s own characteristics, including its basic characteristics, equity characteristics, capital structure and governance mechanisms.On the empirical analysis, taking2009-2012China’s A shares a total of1965listed companies as samples, this paper selects the last year’s managerial ownership, the control of major shareholder and their interaction as explanatory variables; and selects last year’s equity restriction, the proportion of independent directors, the management expense ratio, financial leverage and operating conditions as a control variable. The SPSS17.0software is applied in the descriptive statistics and correlation analysis on all variables, and then construct the distributed lag model to examine the relationship between managerial ownership and corporate performance. Finally, the listed companies are divided into state-owned holding companies and non-state-owned holding companies in accordance with the nature of equity, and this paper compares the difference of each effect respectively.The conclusion shows that:(1)the control of major shareholder has a significant effect on equity incentive, and this impact performance as supervision.(2)Differences in the nature of equity will significantly affect the effect of equity incentive. On one hand, government policies have different influence to state-controlled listed companies and non-state-controlled listed companies. On the other hand, the managers in these two different kinds of companies have different business objectives, so compared with the non-state-controlled listed companies, state-controlled listed companies has got an effect of conflict to equity incentive.(3)In the non-state-controlled listed companies, the control of major shareholder has got an effect of motivation to equity incentive.According to the empirical results, this paper puts forward some policy suggestions for reference to improve the poor situation of the equity incentive in our country:① improve the internal governance structure, establish a sound system of independent directors and the supervisory board independent system;②fully consider the ownership structure of listed companies;③norms and disclosure the major shareholder’s transactions;④improve the laws and regulations on equity incentives. In short, the different types of listed companies have to consider the corporate governance environment, especially the issue of control of major shareholders.