Managerial Power, Equity Incentives And Dividend Payout Policy

Under the modern enterprise management system, corporate separation of ownership and management, corporate shareholders as principals with ownership, the operator as a trustee with operation right, as a rational economic man’s willingness to pursue the maximization of both parties have their own interests, while the presence of both information asymmetry, which causes problems internally generated proxy.To solve this problem, the management equity incentive as a long-term incentives emerged.Equity incentive originated in foreign developed capital markets. Equity incentive managers first appeared in the early1950s of the twentieth century America, when the PFIZER first proposed executive stock options, followed by Britain, France, Japan and other developed countries, then incentive stock options from the world into a wave.Stock options as the way of the most widely used in the equity incentive, the data showed that:in the mid-1980s of the twentieth century, the composition of executive compensation stock options accounted for2%,that increased to53%in1998,indicating that equity incentives have become developed the inevitable trend of development of capital markets, and stock option incentives is also considered one of the most productive companies incentives since the1980s.Related to the Western developed countries, the equity incentive in China started late.Though from1999China began to draw on the experience of Western managers incentives, because of the imperfect asset market, China began to gradually introduce equity incentive till the1990s.2005was the peak of the equity division reform, as well as equity incentive dividing line in our country’s development."Equity Incentive listed companies management approach" December31,2005issued by the Commission (hereinafter referred to as "management approach") marks the company’s manager of equity incentive officially started. September30,2006, the State Council, the SASAC and the Ministry of Finance jointly issued the "State Holding Listed Companies (Domestic) implementation of equity incentive pilot scheme" to guide and regulate the specification of state-owned listed companies and the implementation of equity incentive mechanism, which shows that the use of the equity incentives improved with the gradually developed relevant laws and regulations.Equity incentive is a way to grant the Company’s shares for directors, senior management, core staff and other personnel to carry out long-term incentives. The purpose is to slow the agency problems between the owners and managers by granting workers the company stock to link to the company’s performance and the interests of the motivated staff."Management Measures" clearly defined restricted stock and stock options are of two main types of equity incentive plan incentives.The difference between the two ways is that for the stock options,the motivated staff don’t hold the stock before exercising the incentive stock,so that it is difficult to obtain the interests as dividends,and so on.Based on this,we question that whether the motivated staff can manipulate the dividend behavior for getting no profits within a short time?The right of making dividend distribution policy should be in the hands of the board of directors and shareholders.But for the serious phenomenon of two jobs concurrently,the management can affect the implementation of the dividend distribution policy.Whether the company’s management as motivated objects are likely to take the equity divident policy maximizing the incentive effects?This is the research background of the content.Research ideas of this content is to analyze the effectiveness of incentive stock options of listed companies from the perspective of the dividend distribution policy, while introducting the manager authority to further illustrate the effectiveness of incentive stock options. Based on the above ideas, the content is divided into the following five parts:Part Ⅰ:The significance and background of the study. This part illustrates motivation, purpose and structure, and finally elaborates the contributions.Part Ⅱ:Literature review. This part illustrates relevant domestic and foreign literature, then analyzes and compares them.Part Ⅲ:This part uses the principal-agent theory and the convergence of interests and entrenched effect hypothesis as the breakthrough point. Try to find the relevant relationship between the equity incentive and the dividend policy to lay the foundation for the empirical research of this article,then propose the hypothesis.Part Ⅳ:Empirical research. This part illustrates descriptive analysis of the collected samples, descriptive analysis, and multiple regression analysis of the quality of equity incentive and the dividend policy under the managerial power.Part V:Conclusions and recommendations.Based on the hypothesis and the empirical results of this study, this part makes some comprehensive conclusions:(1)Equity incentives induce the management to select the dividend distribution policy with largest equity incentive income, such as reducing the cash dividend payment.(2)The managerial power and cash dividends policy of listed companies showed a significant negative correlation,(3)The powers of the management strengthen the negative correlation between the equity incentive and the dividend policy.For conclusion, this paper presents recommendations:(1) When the listed companies want to set a reasonable equity incentive plan, it’s better to consider the granting objects, granting price, incentive conditions, incentive validity, granting number and so on. Then the equity incentive plan would weaken the short-term motivation of management.(2)The listed companies should actively improve the internal governance structure, introduct the independent directors to optimize the structure of the board, and improve the professional committee of the Board mechanism, strengthen supervision and management, to make the equity incentive progress tc^become an effective means to solve the agency problem.(3)Strengthen the supervision of listed companies’dividend behavior.(4)Establish and improve the system of equity incentive system.(5)Strengthen supervision on implementing process of our company’s equity incentive plan.Throughout the study, this paper makes a contribution in the following aspects:(1)Relevant research literature on incentive stock options previously focused on inquiring the utility of incentive stock options from the perspective of corporate performance and less literature researched the effectiveness of incentive stock options from the perspective of dividend distribution policy.In addition, for making the final conclusion more sufficiency, this article will introduce the variable of managerial power to test the effectiveness of equity incentives.(2)The data used in this paper is the financial data of listed companies that released and adopted the equity incentive plan between2009and2012.That can make the conclusions more representative.