Research On Relationship Between The Motivation Of Listed Company Equity Incentive(LCEI) And Its Influence

With the separation of ownership and control right, the agency cost becomes an important issue of corporate governance. LCEI as a means to solve the problem of the first kind of agency cost is widely used. But the study found that LCEI for the growth of the listed company’s long-term effect is not significant. Different scholars have different views of the motivations of LCEI, supportive scholars agree that the motivation is to lead executives’ and shareholders’ goal to the same while the other ones argue that LCEI may be used to seek benefits for the executives and become the result of agency cost. The systematic study of the LCEI is less, and the focuses of existing literature on the influence factors of LCEI are on the characteristics of corporate governance and rarely focus on the motivation of LCEI. This paper argues that the motivation of LCEI can be divided into welfare and incentive model, and hope to study whether the motivation to influences the result.This paper adopts normative research and case analysis research method. In the normative part, this paper combed the LCEI related concepts and related theories, sums up the classic literature and the new research results on LCEI. Though normative analysis, this paper classified the motivation of LCEI the incentive one and the welfare one. Also, this paper summarizes the factors of its motivations. In the case analysis, this paper is given priority to the LCEI of the HAIMA Automobile and divides its motivation to the welfare according to the vesting period performance indicators, the exercise price, incentive validity standards and so on. Measuring its effect through the accounting performance and marketing reaction, and founding that the plan didn’t reach the intended target. At the same time, with the LUZHOU aged pit(for incentive motivation to implement equity incentive) as the comparative case analysis, this paper sums up the characteristics of a successful LCEI.Through the research, this paper concluded that:(1) the motivation of LCEI can be divided to the incentive one and the welfare one. The motivation of HAIMA Automobile is the welfare one.(2) The major factors of motivation of LCEI are system background, corporate governance and corporate characteristics. The factors for HAIMA Automobile are the board independence is not strong, its own characteristic is institutional investors benefit.(3)Different motivations of equity incentive can lead to different economic consequences. Welfare equity incentive is not in order to improve its performance, just to the welfare of senior executives. But it could lead to the company’s performance decline, the market reaction is negative and executives and other economic consequences.(4)To judge whether the equity incentive success not only should focus on whether they improve the company’s performance, more should pay attention to the motivation of its implementation.(5) Incentive equity incentive plan needs to have the following features: the high granted price, strict conditions, reasonable awarded quantity, and a longer period.