Research On The Influence Of Equity Incentive On The Cash Dividend Payment

The principal-agent problem is caused by the separation of ownership from control rights. How to solve the principal-agent problem of corporate governance effectively has become one of the most important issues. Equity incentive as a long-term mechanism aims at solving the conflict between management and shareholders, reducing short-term behavior, guaranteeing between management and shareholders to have consistent interests. Dividend payment is related to the distribution of operating outcome, to the interests of inventors and to the capital that is needed in the future. In recent years, scholars have conducted some researches on the relationship between equity incentive and dividend policy. The result shows that equity incentive has an effect on the dividend policy, the management may regulate the dividend policy because of their self-interest.In consideration of the special circumstances of equity incentive, this paper chooses the listed companies in the period of 2006-2012, which adopted the equity incentive initially as research samples. We investigate whether the management have the self-interest behaviors in the process of equity incentive. We primarily use the Propensity Score Matching to reduce endogenous problem, to find out the matching sample by this method and to compare the differences between the two groups in the level of payment, so we can thoroughly study the correlation between the equity incentive and the level of cash dividend. The empirical analysis shows that the level of cash dividend payment has improved after the company implemented the equity incentive; the level of cash dividend payment in the companies that adopted equity incentive plans is higher than the matching companies'. Therefore, the management have the opportunistic behavior in the process of the implementation of equity incentive to reduce the exercise price by increasing the cash dividend, to improve the stock price by the dividend signaling effect and to maximize the value of equity incentives. The management's opportunistic behavior shows that some drawbacks have existed. Equity incentive not only fails to solve the principal-agent problem, but also leads to the emergence of new agency problems. The conclusion in this paper will make a contribution to the government departments for making the related rules to protect the interests of investors and to reduce the management's self-interest behavior.