The Study Of Equity Incentive Announcement Effect

With the realization of China’s Share Segregation Reform, and the promulgation of"Management approach of listed companies’ Equity Incentive "as well as "State HoldingListed (domestic) implementation of Equity Incentive pilot scheme", Equity Incentive inChina formally opened the big curtain. However, due to the relatively short timestandardized application of Equity Incentive system in China, it takes time to see whetherEquity Incentive in our country would really solve the principal-agent question. ButEquity Incentive announcement effect has been fully reflected in the market. EquityIncentive mode is a considered factor when listed companies make Equity Incentive plan,since its t mechanism is not the same, it has different effect brought to the market reaction.This article is based on the samples of listed companies that announced EquityIncentive programs between2006and2012. In addition to exclude factors other than theannouncement of Equity Incentive programs, such as the external economic environmentfactors, industry factors, we individually select a control sample company for each sample.The method of this article is Event Study, we select the daily average cumulative abnormalreturn (ACAR) as index to analyze the market reaction to the listed company’s firstannounced of the Equity Incentive plan, and compare the different incentive pattern. Thestudy shows that: in the event window, there are significant positive announcement oflisted companies on the market before and after the Equity Incentive plans announcement;further classification of samples by incentive pattern, it shows that stock option pattern ismore pronounced than restricted stock. The research results tell us that incentive plan hasbeen leaked, the listed company information disclosure system should be reinforced andimproved; compared to the more mature stock option incentive pattern, restricted stockincentive effect is not very good play. The results of this study is to help listed companiesto select the right incentive mode when they are to develop a Equity Incentive plan, and make reference to their information disclosure system construction, and to provide EquityIncentive policy reference to the regulatory authorities as well.