Research On The Utility Of The Stock Incentive For The Executives In The Time Dimension Of The Listed Companies

Equity incentive emerged as a long-term incentive theory from the fifty years of the last century in the United States, then populared in Europe and other developed economies, today it has been becoming mature after decades of development. The introduction of equity incentive in China as the reform of state-owned enterprises in the ninety’s of the last century, and now it has been relatively mature and has made some achievements. However, there are many problems in the reality of our country because of the short development time, the difference of the system, the imperfect rules and so on. For example, whether the equity incentive can be used as a long-term incentive,what is the relationship between the length of time and the incentive effect, there is a wide range of disputes in China’s current environment. This paper starts from the time resource investment, analyzes the incentive effect of shareholders and executives with game theory, studies the function of time investment and incentive effect, and analyzes the relationship between them.First of all, the construction of positive and negative utility function from incentive policy itself, and the utility function of shareholder incentive of their time allocation according to the literature, the n analysis the optimal timing distribution of shareholder with game theory. The study found that: the shareholders of the company will implement the incentive when the shareholders think the implementation of equity incentive policy benefits than losses of equity, in the asymmetric information environment. After the implementation of equity incentive, shareholders found that there is a critical point on the supervision and efforts of the time distribution, which makes the largest shareholder returns. Executive master more enterprise information as well as their utility function, so executives will be building incentive utility function according to the principle of optimal expected profits and to determine the self- interest and the optimal time allocation.Secondly, the complete utility function is derived and the marginal utility is analyzed in the time dimension. The study found that: the equity incentive policy is not universal as a long-term incentive strategy, and the specific business environment related. If you increase the input of the time, for shareholders, the marginal income may increase, also may be diminishing marginal, may also has nothing to do with time. Moreover, executives are not necessarily only use their own rights to shorten the incentive time, there may be an effort to make the incentive time to extend. This is related to the growth of the company, the company’s understanding of the situation and the extent of the company’s control executives.Finally, through the analysis of the previous research, this paper put forward the reasonable use of equity incentive in the incentive period of equity incentive effect.