Analysis On Relationship Between Equity Incentive And Comprehensive Performance Of GEM Listing Companies

As an important incentive method, equity incentive plays an extremely important role in the formation of "interests communities" between the company owners and managers, encouraging to coordinate and achieve the target successfully, improving the company’s vitality, competitiveness and comprehensive performance. To meet the needs of corporate finance, and stimulate better corporate governance, China’s GEM market trading began in October 2009, and as an important channel for corporate financing, it has become the most dynamic stock market. Based on attracting and retaining highly skilled professional talents, more and more GEM companies began to develop and implement equity incentive programs.This paper selects 190 GEM companies which have implemented equity incentive program from 2009 to 2014 as the sample, exploring the relationship between equity incentive and the comprehensive operating results of the GEM listed companies empirically. Firstly, this paper reviews the related literatures at home and abroad, clearly defining GEM listed companies, equity incentive, comprehensive performance and other related concepts, using principal-agent theory, human capital theory and incentive management theory as the theoretical basis, and proposes three research hypothesis based on that. Secondly, the paper sets three model tests, namely "there exists positive correlation between the GEM listed company shares inspiration and comprehensive operating results" 、 "different types of equity incentive have different incentive effect" 、 " different levels of equity incentive have different incentive effect". In the analysis study, this paper considers the overall GEM listed company’s traditional financial abilities and innovation ability, first proposed the concept of "comprehensive performance", and using factor analysis method to calculate it, which is the explained variable. In the process of explanatory variable design, this article introduces a more accurate variable which measure equity incentive level and effectiveness--relevant changes in the business management’s stock and option values generated by 1% change in the stock price. Finally, this paper researches the impact of other elements of the program implementation on corporate comprehensive performance, these elements include the company asset size, ownership concentration and the proportion of independent directors of the board and so on, thereby the multi-perspective analysis correlation tests between GEM listed company equity incentive and comprehensive performance can be achieved.The empirical results show that the relationship between equity incentive and comprehensive performance of GEM listed companies is significantly positive, and firm size has a significantly positive impact on comprehensive performance. This paper classifies different equity incentive modes, discussing the correlation between equity incentive levels with comprehensive performance under different equity incentive modes, the results show that under the restricted stock mode, incentive effect is remarkable; whereas under stock option mode, the effect between equity incentive levels and comprehensive performance is no significantly negative; the effect of restricted stock incentive mode is better than the stock option pattern. At the same time, the paper verifies different sections of equity incentive proportions and finds that different equity incentive proportions have different effects. When the proportion of equity incentive is in [0, 3.5%) interval, the relationship between equity incentive and comprehensive performance isn’t positive significantly; when the proportion of equity incentive is in [3.5%, 10%] interval, there exists significant positive correlation between them.Relevant solutions and suggests based on targeted results to raise equity incentive implementation effect are homeopathically proposed. This paper recommends that companies listed on GEM to design scientific and rational equity incentive programs,establish effective internal governance mechanisms,perfect the laws and regulations of the GEM to build a scientific and effective supervision and restraint mechanism.