The Effect Of CEO Equity Incentives To The Information Content Of The Stock Price

The equity incentive is initially created for solving the principal-agent problem,which is usually caused by the detachment of ownership and operating rights of theenterprise. Some researches showed the equity incentive plans can play a positivegovernance role, While some scholars insisted implementing equity incentiveschemes can lead to the managers’ opportunism behavior. This paper focuses onexamining the effect of equity incentives to the stock price information content, andthis research subject is both theoretically and practically meaningful.As to measure the stock price information content, the paper demonstratesseveral conventional ways used by the scholars, and finally selects the capital assetpricing model to act as the measurement model, while the synchronicity of stock priceindex acts as the measuring indicator. Being based on the Corporate GovernanceTheory, the paper considers the factors that influence the stock price informationcontent, then constructs the basic and developed models of the study. In the course ofthe empirical research, this paper examines the effect of equity incentive schemes tothe stock price information content at first. To study further, the paper tries to explorethat in the event of actualizing equity incentive schemes, whether the ultimate controlrights and the types of subject matters will influence the stock price informationcontent. Moreover, in order to examine the reliability of the empirical results, thispaper undertakes the robustness tests from two aspects.And the research finally arrives at three main consequences: Firstly, equityincentive can significantly reduce the stock price information content of the listedcompanies. Secondly, in case of carrying out equity incentive schemes, the ultimatecontrol rights won’t significantly affect the stock price information content of thelisted enterprises. Thirdly, the subject matters of the equity incentive schemes won’tsignificantly influence the stock price information content of the quoted corporations.