Research On The Relationship Between Equity Incentive Of Listed Companies On Growth Enterprise Market And The Financial Performance Of Company

Separation of two rights which operates in the modern enterprise system makes their own different profit pursuit between enterprise owners and operators become potential conflicts. The utilization of equity incentive bound interests of the both together. Through using this method, enterprise owners grant certain stock rights to operators and thus make them participated in management decisions, interests distribution and undertaking operational risks. Since its establishment on October thirtieth 2009, the Shenzhen Stock Exchange GEM market has be en used as an effective complement to capital market of China. GEM listed companies constantly has tried to adopt equity incentive system since 2010.The paper chooses 125 GEM listed companies as samples. Then, through using regression analysis, the paper makes an empirical study of the correlation of GEM listed company equity incentive and the financial performance of company. This thesis takes the "Comprehensive Value" as an explained variable of regression model and the "Equity Incentive Amount" as an explanatory variable, as well as the "Size of Company," "Ownership Concentration" and "the First Year of Release of Information" as the control variable. In order to determine scientifically the "Comprehensive Value", the paper selected 12 performance evalua tion indexes based on Chinese enterprises’ performance evaluation system and the characteristics of GEM listed companies. Four main components is extracted by using principal component analysis. The result of regression analysis of whole samples proves the first assumption—the equity incentive amount of GEM listed company has a positive correlation with the financial performance integrated values at the level of 10%. The regression analysis of samples which grouped based on motivation model and the validity of equity incentive proves the second assumption—compared to the stock option model, equity incentive and financial performance of the company is more relevant under the model of restricted stock. However, the third assumption is denied by the result of this analysis which is that compared to incentive plan which has shorter valid period, the longer one does not enhance the correlation between equity incentive and financial performance of the company. With a deeper analysis of factors which influent the effect of equity incentive, the main four was discovered: the effectiveness of the capital market, the model of equity incentive, the design of vesting conditions, and the reliability of accounting information. Finally, this paper gives a conclusion of the empirical study and also some recommendations to equity incentive system of our GEM listed company from the external environment, the listed company and the design of equity incentive plan.