Stock Option And Corporate Innovation Output

With the faster development of science technology, innovation is more and more important for corporate. It becomes necessary to make suggestions to corporate in improving innovation. Most of the existing literature pay attention on whether the implementation of equity incentive will promote the enterprise investment in innovation, however the research on if the implementation of equity incentive can improve the innovation output is less, and both haven’t drawn a unified conclusion. In-depth analysis of how equity incentives have an effect on innovation can help shareholder understand the equity incentive mechanism, and make a reference in the actual implementation. At present, the implementation of equity incentive in china has been last for nearly 10 years, as a consequence,there’s enough data for research.In this paper, we first use the difference-in-difference model to analyze whether the enterprise innovation output was improved after the implementation of stock option with the observed samples of 195 listed companies which announced and implemented the stock option between 2006-2013, combined with the paired samples we get by Propensity Score Matching. We find that stock option can motivate corporate innovation. In order to explore the driving mechanism of stock option motivate corporate innovation output, we make an explanation from the risk-taking incentive and performance-based incentive perspective. This paper find that stock option includes opposite impacts on innovation, the ultimate driving force depends on the relative magnitudes of the two effects. According to the conclusion we drive from the D-I-D model, we can infer stock option mainly improve the innovation output through risk-taking incentive. Some stock option plan elements will affect the driving strength of these two kinds of incentives on enterprise innovation output. We show that risk-taking incentive is stronger when the performance assessment standards are lower, when exercise ratio distribution showed a trend of increasing, when the incentive period is longer. The conclusion we draw from the study can provide suggestions for the corporate when facing with the choice whether to implement stock option and designing the plan.