Analysis Of Self-interested Behavior Of Management In Equity Incentive Of Listed Companies

Equity incentive has been considered to be the key measure to solve theprincipal-agent relationship between the shareholders and the management. Since2006,the CSRC promulgated "measures for the administration of equity incentive listingcorporation (Trial)", China’s listing corporations launched its equity incentive plan, equityincentive system has got the fast development in our country. But China’s listingcorporations in the equity incentive plan draft design and implementation phases existmany problems, some super executives caused controversy. In this paper,we want toinspect that the existence of the management self-interest behavior in equity incentive plandesign and implementation process and influence factors.Firstly, this paper analyzes the existence of the management self-interest behavior inequity incentive plan design process and influence factors. By constructing acomprehensive scoring system, we score on indicators of performance appraisal andincentive period of equity incentive plan and obtain the overall score of each listingcorporation, then compare scores of the listing corporation with the theory ofcomprehensive scores and verify the existence of management equity incentive scheme ofself-interest behavior in initial design stage. Besides we use the method of event study totest results. Then, adopting the ordinal regression method, we analyze the influencingfactors of the management self-interest in equity incentive plan of the initial design stage.The study find that: in the initial design stage, the independent director proportion, theproportion of large shareholders and the proportion of management shareholding have aneffect on the managerial self-interest.Secondly, we apply the modern game theory to build a game model between largeshareholders and the management, and construct the utility function of the two sides toanalyze the determinants on the implementation of large shareholders’ equity incentiveand managerial entrenchment. We find that there is managerial entrenchment in theprocess of the equity incentive plan. And the influence factors of self-interest behaviorinclude investment opportunities, shareholders on management regulation, pay-performance sensitivity and ownership by the management.Finally, according to the research results, we put forward the suggestion and solutionmeasures that help to standardize the design of the equity incentive plan in practice. Theconclusion of the study has played a positive role in avoiding self-interest behavior whencarrying out equity incentive.