Research On The Relationship Of Management Equity Incentive And Corporate Performance

Equity Incentive is generated from advanced American economy in the fiftieth of the 20th century. Evidences from decades of practice shows that Equity Incentive is an effective tool to integrate the interests of management with the shareholders. Since Equity Incentive was first introduced to China, it has exposed some problems due to the restriction from company’s interior and exterior circumstances. The reform of equity division in 2005 has witnessed the publication of< equity incentive management measures of the listed company (Trial)> from CSRC along with the implement of its supporting policies, which has stimulated the rapid development of Equity Incentive.This thesis is trying to combine the characteristics of small and medium enterprise board, growth enterprise market and private listed company, establishing empirical model for the equity incentive situations of companies been listed since 2006,so as to explore the relation between senior executives’equity incentive and company performance. This thesis has elaborated concepts, basic theories and published literatures related to equity incentive. Then analyze the current situation of equity incentive in small and medium enterprise board and growth enterprise market, aiming to find their characteristics. The following empirical analysis has combined the basic theories of equity incentive with the characteristics of small and medium enterprise board and growth enterprise market, and built 8 hypotheses that may affect corporate performance. When choosing the variables, this thesis comprehensively summarized companies’operating results from multiple dimensions. This thesis chose Factor Analysis to collect common factor among 7 financial indexes of listed companies, so as to get the comprehensive factor of companies’business performance as the explained variable of this thesis. This thesis has used the product of the proportion of equity incentive in the companies’equity incentive plan and the remaining time of validity period to be explanatory variable. Based on the characteristics of private listed enterprises, this thesis has also introduced 7 control variable- firm size, Debt-to-Assets ratio, operation capacity, solvency, independent director, ownership concentration, CEO Duality and managerial compensation. On collecting sampled data, I have processed the financial indexes of private listed companies which has implemented equity incentive in both small and medium enterprise board and growth enterprise market after the reform of equity division. After removing the incomplete data and data collected from companies which haven’t implement equity incentive for long, this thesis collected 359 data. By factorial analyzing, I got the multi-stress of companies’business performance, then compare the multi-stress with the business performance of the listed companies. At last, this thesis has constructed the Fixed Effect Model for the Panel Data, and examine it’s significance.According to the empirical research, the thesis has draw the following conclusions:1)the portion of equity incentive and period of validity have significant positive correlation with the business performance of listed companies.2)based on the analysis of the controlled variables:the asset size has significant positive correlation with the business performance of listed companies; A significant negative correlation between asset-liability ratio and the business performance of listed companies; a significant negative correlation between liquidity ratio and the business performance of listed companies; a significant positive correlation between the turnover of total capital and the business performance of listed companies; a significant correlation between the ownership concentration and the business performance of listed companies; a significant positive correlation between the CEO Duality and the business performance of listed companies 3)the hypothesis of the positive correlation between the performance of listed companies and the ratio of independent directors has not pass the empirical test, neither did the positive correlation between the business performance of listed companies and the executive compensation.In the last part of the thesis, a brief conclusion is drawn on the basis of empirical study; the relevant policy recommendations are suggested, and the deficiencies in this thesis are been analyzed as well.