The Wealth Effect Of Equity Incentive In Listed Companies

Since the split share structure reform in2005, the number of listed companies in the implementation of equity incentive plan continued to increase. Incentive programs in listed companies are also maturing. Stock options granted to the company’s key employees especially the management. It can inspire and guide key staff and management to enhance corporate value and increase shareholder wealth. This has become the consensus of theory and practice. In this paper, after reviewing domestic and foreign literature on the subject, we found that the current equity incentive scholars study the impact on shareholder wealth is concentrated in market reaction or performance improve aspects. However, if the equity incentives to increase shareholder wealth have a significant impact, equity incentive really achieve the intended purpose, then this effect both in the market reaction to the announcement date reflects the positive impact it can exist for long-term performance of the company, the impact of different periods should be consistent. Therefore, this departure from shareholder returns, testing whether equity incentives can bring wealth growth to shareholders in the short and long term, and there are important factors which affect shareholder wealth.This study found that equity incentives will appear significantly positive excess returns before and after the announcement, but the market for the reaction type and stock options in two different excitation modes are very different;and incentive-based equity incentive vesting conditions with respect to more stringent welfare-type, so the market is expected incentive equity incentive plan will be able to generate higher excess returns; also the non-state-owned companies can implement equity incentive plan more attractive to investors. In the long-term performance of the company’s equity incentive impact, the performance of implemented company has contrast paired with the not implemented, found significant differences between them. The performance of the implemented was significantly better than the non-implementation in the implementation of the year’s. As for the equity incentive plan has been implemented longitudinal comparison of companies and found that both ROE and EPS, the performance after the implementation are better than the performance prior to the implementation, indicating equity incentive to shareholders bring a positive influence wealth. In addition, the study also found that the performance of equity incentive-based incentive program is better than welfare type. The performance of a higher proportion of equity incentive companies is better than the low proportion of equity incentive companies.Conclusion Based on the above equity incentive and shareholder wealth impact studies, this paper presents the following policy recommendations:(1) strengthen supervision and information disclosure system of the securities market, equity incentive exists to prevent information leaks case before the announcement date;(2) establish a scientific achievements assessment indicators, develop a reasonable exercise conditions, Circumvent the manager’s self-interested behavior, to prevent damage to the interests of minority shareholders.(3) Improve the corporate governance structure of listed companies, and strengthen supervision mechanism, introducing appropriate institutional investors and increase the proportion of independent directors, strengthening the external audit, give full play to the Board of Supervisors independence.