The Research On The Influence Of The Equity Incentive On The Corporate Investment Behavior

In the background of social production and increasing competition, because of their limited time, energy, ability, etc., the owners had to delegate decision-making power of production, operation and management of enterprises to those managers who have the expertise and experience. Owners paid some compensation for managers, but operating results were still owned by the owners. Ownership and management of enterprises thus separated from each other, forming a principal-agent relationship between owners and managers, and agency costs and agency conflict aroused. In the context of the separation of ownership, how to design an effective incentive system for managers to reduce agency costs, alleviate agency conflicts, so that they have an incentive for enterprises due diligence work, is not only an effective way to achieve the goal of the owners, but also the key way to solve corporate governance issues.As the main growth motivation of the enterprise and the future cash flow, whether investment has the evaluation efficiency is directly related to operational risk, profitability and capital markets for its performance and development prospects of business, which is related to the enterprise value realization maximization. In reality, many of the investment decisions of the company often go against the goal of maximizing the value of the actual investment cost, which deviates from the optimal investment scale called inefficient investment. Inefficient investment behavior is largely a manifestation of the agent cost produced the principal-agent problem, and whether the stock incentive, as a kind of incentive mode of Modern Corporation management, can play an effective role, alleviate the agency conflicts between shareholders and managers, has been the focus of the academic field. The in-efficiency investment is the breakthrough point study on the equity incentive. We can examine the incentive effect of enterprise ownership of our country from another angle incentive effect, with important practical significance.Firstly, the equity incentive and corporate performance, ownership and inefficient investment related literature are reviewed. With principal agent theory, asymmetric information theory and human capital theory as the foundation, the paper unifies our country actual situation carrying on the analysis from2009to2013.Select China’s SME board and the GEM Listing Corporation as the research sample, and use Richardson (2006) method to construct a linear regression model, from the three dimensions of the Equity incentive plan, the proportion of management shareholding, ownership concentration, to research the influence on the corporate inefficient investment and carry out empirical research.The results found(1) There is generally inefficient investment behavior in China’s SME board and the GEM Listing Corporation, and the underinvestment behavior accounts for more than half.(2) The equity incentive plans have significantly suppress over overinvestment of China’s SME and the GEM board Listing Corporation, but do not play a significant governance effect on underinvestment behavior.(3) Management ownership has a weak positive relationship with the company overinvestment but not significant; there is significantly positive correlation between Management ownership and enterprise underinvestment level.(4) In the context of equity incentive, the company’s top ten shareholders ownership and corporate overinvestment are positively correlated; the company’s top ten shareholders ownership and corporate underinvestment levels are related but not significant, thereby alleviates the effects of equity incentive plan on the Inefficient Investment Behaviors.The main innovation and contribution of this paper are:divide the inefficient investment behavior into overinvestment and underinvestment, respectively research the relationships between the equity incentive and investment behavior; research the equity incentives’ influence on investment behavior from the perspective of both qualitative and quantitative; introduce ownership concentration index to test restraining effect on the incentive effect of large shareholders, and strive to study more systematically and comprehensively.Because of the limit of time and ability, this paper has some shortcomings, which need to be improved in the further study. In this paper, the degree of simulation of non-efficient investments empirical model is not high, it may be missing some important variables, and therefore needs to be further improved; The paper did not distinguish between the different equity incentive modes effect on corporate investment behavior; did not distinguish between different ownership equities’ incentive impact on corporate investment behavior.