Research On Effects Of Equity Incentive To The Long Term Profitability Of Listing Corporation

Separation of ownership and management company is a prominent feature of the modernenterprise system, so the principal-agent problem appears. Equity incentive is a constraintincentives to solve the problem of principal-agent. Its purpose is to give the operator a certainquantity of company stock in order to make their income levels and the company’s futureprofitability linked. It can promote the manager to serve the company better. Frankly,it isdesigned to promote the company’s long-term development by enhancing the company’slong-term profitability. But can this system be achieved? How about the effect of the system?It is necessary to do an empirical test. From the existing literature, we can see many scholarshave made a number of related research, but none of them can have the same conclusionabout the relationship between equity incentive and profitability, especially the long-termprofitability.In this paper, we use a combination of theoretical and emprical research methods. On theimplementation of equity incentive policies affect the company’s research on the long-termprofitability.First, the paper describes the basic theory for equity incentive, and reviews literatureabout the effect of equity incentive. Second, defines the concept and the content of thelong-term profitability,and analyzesthe impact of the equity incentive mechanism forlong–term profitability. Lastly, do a empirical test between the equity incentive and long-termprofitability by the overall effect of equity incentive, different properties and differentincentives property. From the overall, we can see:(1)Overall, equity incentive can makelong-term profitability enhance, but the rate needs to be strengthened;(2) Different ownershipattributes will affect the implementation of equity incentive effect, private companies arebetter then the state-owned companies;(3)Different equity incentives will bring differenteffect on long-term profitability, stock options is better than restricted stock.