Control Rights Structure And Equity Incentives Validity Period Setting

Equity incentive system is one of the effective methods to solve problems of agency by agreement.Since January 4th,2006,the official release of Listed Company Equity Incentive Management Approach(for Trial Implementation)and the subsequent release of three memos,two statutory interpretations and a series of relevant regulations regarding matters related to equity incentive in the PRC,Chinese Listed Companies implementing standardized process of equity incentive has gone through 10 years.And on December 23 rd,2015,China officially released a new draft.Since then,relevant institutional environment moved towards maturity.However,can the implemented equity incentive plans achieve the expected incentive effect of companies? It is obvious that the contract design of equity incentive plans are important.And the validity period of equity incentive setting is one of the key factors of contract design.For reasons of "self-interest",when the actual controller separates from enterprise management power,larger principal-agent cost will be produced inside the company,and deviation are often produced in the design of equity incentive plans,thus affecting the equity incentive effect.Based on the perspective of corporate governance environment,this paper studies the influence of the actual controller's control rights structure on the design of equity incentive plan.Through the integration of theoretical analysis and empirical test method,this thesis tries to analyze the influence of actual controller's control right on validity period setting of equity incentive and the difference of the influence degree in companies of different ownership property,industry characteristic and management power level.Through the review of some of the traditional theories,the theoretical analysis analyzes the preferences in control rights that may be possessed by the actual controller in above cases,and puts forward corresponding assumptions.In the empirical test,this paper collects sample data of 959 listed companies in China which implemented the equity incentive plan from 2006 to 2015.To verify the theoretical assumptions,the control rights of actual controller is introduced into the model as an explanatory variable,and the panel data are analyzed by a regression and then checked by cross multiply trend model.Through observation and analysis of the results of a series of regression analysis,the following conclusions are drawn:(1)The control right of the actual controller has a significant positive correlation with the setting of the validity period of the equity incentive;(2)In state-owned enterprises,the influence of the actual controller's control right on the validity period of the equity incentive is more obvious.And state-owned enterprises will tend to set a longer period of equity incentive validity;(3)The control right of the actual controller in non-high-tech enterprises has a stronger positive effect on the setting of the validity period of the equity incentive;(4)When the management team's power is weak,the positive correlation between the actual controller and the validity period of the equity incentive will be enhanced.According to the results of empirical test,this paper puts forward two suggestions on the validity period setting for China's listing corporation in the equity incentive.Firstly,in the implementation of equity incentive plan,the actual controller should pay attention to the balance of other factors while extending the validity period of equity incentive.Secondly,extend the validity of equity incentive in state-owned enterprises by extending the exercise period.