Empirical Research On Influence Of Shareholders Control To Equity Incentive And Inefficiency Investment

In 2013 and 2014, China President Xi put forward the strategic conception of "One Belt And One Road" and put forward that China will founded the Silk Road Fund. It provided great opportunities for international cooperation. Chinese enterprises face opportunities to invest overseas. It is an issue that how to reduce the non efficiency of corporate investment and achieve the expected earnings. From the perspective of the agency problem, this paper researched on whether executive equity incentive was able to reduce the non efficiency of investment.Firstly, this paper summarized the related literatures of equity incentive and investment efficiency. Secondly, based on the principal-agent theory, human capital theory and the management power theory, the paper put forward the research direction. Thirdly, this paper selected the sample of companies from Shanghai and Shenzhen stock exchange in 2008 to 2013 and inspected the relationship between equity incentive and investment efficiency. This paper considered two aspects of non efficiency of investment, overinvestment and underinvestment. The study examined whether equity incentive is able to reduce non efficiency of investment and considers influence of shareholders and the growth stage of enterprises.The results of the study show three points. Firstly without considering the influence of big shareholders, it has been found that the equity incentive reduces the level of underinvestment, but it hasn’t been found that the equity incentive reduces the level of overinvestment. Secondly considering the influence of big shareholders, higher level of equity incentive led to the better investment efficiency. Thirdly for enterprises with overinvestment, equity incentive did not have a good influence in the stage of decline. While for enterprises with underinvestment, equity incentive would reduce the level of non efficiency in the stage of maturity. In a word under certain supervision and appropriate time, equity incentive would reduce the non efficiency of investment. Finally, explained the study results and gave some advices. Basing on the results of study, this paper gave a number of advices and hoped provide reference for the enterprise management.