Research On Effects Of Equity Incentive On Inefficient Investment Behavior Of Enterprises

Although equity incentive mechanism develop lately, but in recent years it hasgreater development. More and more listing corporation launched equity incentiveplan, in2013there have been123listing corporation to implement the equityincentive, reaching a record high. There are many domestic and foreign literaturesabout the equity incentive, but almost all focused on whether it can play a positiverole in promoting the performance of the company. Many studies neglected the factthat equity incentive has an impact on enterprise performance through investment asthe middle bridge. Based on the former research, this paper discusses the relationshipof equity incentive and inefficiency investment. This paper analyzes the incentivemechanism of equity incentive, and it theoretically demonstrated that equityincentives can optimize corporate investment behavior and inhibit non-efficiencyinvestments.This paper selects the data from year2011to2012of Shanghai andShenzhen listed enterprises as the study samples, and it comprehensively analyzes theeffects of equity incentive on inefficiency investment using descriptive statistics,correlation analysis, regression analysis, through the establishment of inefficiencyinvestment model and the relationship research between equity incentive andinefficiency investment.The article is divided into a total of six chapters. Firstly, this paper summarizesand comments the domestic and foreign literature on the equity incentive, corporateinefficient investment, and the relationship between them. Secondly, it theoreticallydemonstrates that equity incentives can optimize corporate investment behavior andinhibit non-efficiency investments through analyzing the incentive mechanism ofequity incentive. Thirdly, describes the application of equity incentives in Shanghaiand Shenzhen market. Then this paper proposes two assumptions and does empiricalresearch by using the data of listed companies from year2011to2012who implementequity incentives as samples. Finally, the outcome concludes the research for thisarticle, as well as the policy recommendations and limitations.The text results give mainly the following points: First, equity incentives canreduce inefficient investment of enterprise. Second, inefficiency investment will riseas proportion of the largest shareholder increases. Thirdly, debt financing can restrainthe inefficiency investment including overinvestment and underinvestment. This studyprovides the following recommendations for the development of China’s capital market and listed companies to reduce agency cost: improving the corporatemanagement; to set up and cultivate manager market; to set up efficient capital market;design the reasonable debt level.