Research On Effects Of Equity Incentive On Inefficient Investment Behavior Of Chinese Listed Companies

In modern enterprises, owners keep the ownership and give managers the operation rights, but the principal-agent problem has always been an important problem in theorists and practitioners. Thus, western entrepreneurs created equity incentive to reduce agency costs and alleviate agency conflicts by giving managers certain company stocks. In 2006, equity incentive mechanism was officially introduced into China. The number of companies which practiced equity incentive plans has been increasing quickly and by the end of 2015, a total of 671 companies has been practiced 906 equity incentive plans. So what is the implementation effect of equity incentive in China's listed companies? This paper chose principal-agent problems in the field of investment as a starting point to study the impact of equity incentive on inefficient investment behavior of China's listed companies.This paper chose 2010 to 2014 as the study period and selected 1219 A-share listed companies as samples, using fixed effects regression method to study the effect of equity incentive on inefficient investment behavior of China's listed companies. The results are as follows.1) The inefficient investment behavior exits in China's listed companies. Furthermore, the underinvestment is more prevalent and the overinvestment is more serious.2) The implementation of equity incentive can effectively suppress inefficient investment behavior in China's listed companies, but this inhibitory effect is only remarkable in the overinvestment behavior. However, for the underinvestment behavior, the mitigation effect of equity incentive is weak.3) Further distinguishing the nature of ownership of sample companies, the study reflects that only in non-state-controlled listed companies, the relation is significantly negative between equity incentive and overinvestment. Otherwise, the effect in state-controlled listed companies is weak. This reflects that the implementation of equity incentive doesn't play a great role in suppressing inefficient investment behavior in state-controlled listed companies, but is good in non-state-controlled listed companies.4) In addition, the study shows that independent director, the independent between chairman and general manager, monetary remuneration and other corporate governance variables don't play well in suppressing inefficient investment behavior in listed companies.