Research On The Impact Of Stock Option Incentive On Corporate Performance On GSM

Stock option compensation is an important corporate governance mechanism. On the onehand, according to the principal-agent theory, it forms a benefit-sharing, risk quintalmechanism between shareholders and managers thus alleviating the corporate agency problem.On the other hand, according to the human capital theory and incentive theory, it is also along-term incentive system, combines the managers’ benefit with long-term businessdevelopment through the design of vesting conditions and the exercise price. And this willretain talent and motivate managers to concern about the long-term interests of the enterprise.With China’s equity division reform in2006, the establishment of the GEM market in2009and the improvement of relevant laws，the external conditions for stock optionsincentive is gradually sophisticated, and number of companies on GEM implemented stockoption incentives are increasing. Continue to explore China’s stock option incentive impact onoperating performance, will support evidence to improve the incentive stock option’s designand then improve corporate performance.In this paper, we based on the principal-agent theory, incentive theory and human capitaltheory, and learned from the experience of domestic and foreign research scholars, selected48companies officially implement the Stock Option Incentive on GEM as samples, and do somestudy on the company’s performance changes during the incentive stock options implement.Firstly, selected the profitability indicators and growth capacity indicators as the corporateperformance indicators, and did descriptive analysis of the change the two indicators after theimplement of the stock option from horizontal angle and vertical angle, and then did pairedsamples T-test to test whether these the change on vertical angle are significant and didindependent samples T-test to test whether the change on horizontal angle are significant.To further test the impact of stock option incentive plan on corporate performance, weselected incentive intensity and vesting conditions as explanatory variables, while controllingthe corporate governance variables, capital structure and size of the company, and then studythe relationship between the stock option incentive and company performance by multiplelinear regression analysis. Finally, according to research findings, made recommendations toperfect stock option incentive plan from the angle of improve the incentive plan design,improve the effectiveness of the capital market, and improve corporate governance, etc.