The Relationship Between Equity Incentive And Corporateperformance

This dissertation is to study the determinants of equity incentive and the relationship between equity incentive and corporate performance in Chinese listed firms through theoretical review, literature review and empirical analysis. 424 firms listed on the Shanghai Stock Exchange were selected as the sample. Ordinary least square(OLS) was adopted to test the relationship between equity incentive and corporate performance resulted from the affection of characteristic factors of the firms.The evidence suggested that the proportion of managerial ownership is related positive to the firms growth of total asset and negative to the proportion of the largest shareholder when the largest shareholder is state-owned holder, which means that high growth enterprises and non state-owned enterprise are more inclined to adopt equity incentive mechanism. While taking Tobin Q as the measure of enterprise performance, the results of regression analysis show that no relationship was found between the proportion of managerial ownership and corporate performance whether consider the affection of characteristic factors or not.According to the results of empirical analysis, suggestions were offered that the internal equity incentive mechanism and performance indexes could be further improved, such as confirming the optimal number of shares and establishing an ownership contract system through scientific calculations,improving the comprehensiveness and systematicness of performance evaluation, that emphasis on quantitative indicators and short-term indicators should not ignore the long-term development of the enterprise. On the external environment, suggestions were offered that the construction of capital market should be further strengthen, and the market evaluation, supervision and information disclosure mechanism should be improved, so as to provide the necessary support for equity incentive mechanism.