Empirical Research On The Relation Between Managerial Equity Incentive And Enterprise Investment Efficiency

As the share-trading reform going on, China’s enterprises are more likely totake equity incentives, which is relatively novel and designed to solve agencyproblems and asymmetric information in the process of corporate governance,motivating managers to make decisions consistent with the company’s long-termdevelopment. The number of persons who concerned about the relationship betweenmanagerial equity incentive and investment efficiency of enterprise is increasingsignificantly. On earth, how does such relationship change with the nature of thecontrolling shareholder and the scale of enterprise? This paper select listedcompanies on Shanghai and Shenzhen stock exchanges from2006to2012.First, this paper briefly descripts the background and significance of thisresearch, review previous literature related to our research, and has a description oftechnology courses on how we are going on our research. Secondly, we analysis thecorrelation between equity incentive and corporate investment efficiency of China’slisted company based on some theories, such as agency theory, managerial powertheory, incent theory, invest theory, laying the theoretical foundation for empiricalresearch. Then we made three main assumptions. Thirdly, we use multi returnanalysis method to process selected data. We define managerial incent as the ratioof incent to the whole remuneration. Many method can measure invest efficiency,but this paper will do it in following way. We compare the actual invest andexpected invest. If two of them are close to each other, then we concern that thecompany has high invest efficiency. And we find that negative correlation betweenmanagerial equity incentive and enterprise investment efficiency exists; Companies,which are not controlled by the government, have higher investment efficiency;Companies with larger size act better than smaller ones under the equity incentive.Both the correlations are significant. However, we didn’t collect enoughinformation of the government controlled companies, so we may have some bias.Finally, we show and make some explanations of what the results suggest, giverecommendations on equity incentive as objective as possible. We sincerely hopethat we could offer a few guidance on enterprise management and compensationmechanism to listed companies. Then, we point out the inadequacies of this researchand indicate future directions for further research.