Research On The Impact Of Equity Incentives And Over-investment On Corporate Profitability

Economic development and such large-scale enterprise specialized division of labor more urgent,and the performance characteristics of corporate governance structure for the management and ownership of mutual separation,separation of ownership and many business people have a solid professional knowledge and rich management skills into their managers,thereby greatly enhancing the ability of the modern enterprise management.At the same principal-agent problem has cropped up,to bring long-term problems.Found that by long practice and theoretical research,Western scholars to explore,as a long-term incentive,equity incentive allows the Agent and the Principal while sharing the profits arising from the enterprise,risk businesses may suffer,Furthermore agency can solve the problem arising,reduce costs,improve the corporate governance structure and promote profitability.Our equity incentive introduced relatively late,while Western countries have already formed a consensus on the equity incentive and widely promoted.Thanks to the support and improvement in the economic situation of national policy,the company’s assets showed a good trend growing,but the attendant phenomenon of over-investment,it has become the focus of the company’s management and academia have carried it attention.At present China’s socialist market economy is still in its infancy,there are many problems and defects,agency problems like over-invested enterprises is one concrete manifestation such as its problems.Our corporate growth and development has been severely constrained over-investment.So the current urgent problem is to try to alleviate agency conflicts,restricting over-investment enterprises generated a number of management.The basic idea of this paper is as follows,beginning to sort out some of the relevant literature at home and abroad for over-investment,equity incentive and corporate profitability the three are reviewed.Next,the paper of the three theories were expounded systematically,according to a convergence of interests explains the executive equity incentive effect on the inhibition of excessive investment,excessive investment will reduce its profitability.Document rare at home and abroad to study the equity incentives and excessive investment,excessive investment and corporate profitability literature are involved,but the incentive,over-investment and the profitability of the business combination of the three.With the severe equity incentive widely in our country,as well as the phenomenon of over-investment,this paper attempts to equity incentives as a crucial adjustment variable,which is a reference to over-investment on profitability,so that equity incentives can reduce the phenomenon of over-investment,to improve profitability.Therefore,it is required to establish and improve the relevant effective equity incentive mechanism to solve similar principal-agent problem because of the company resulting from excessive investment,to achieve a certain effect and supervise managers stimulation,find corporate management and personal interests to maximize the value of the company balance between maximization,to a certain extent to restrain over-investment management behavior.Final regression results show that listed companies incentives and excessive investment showed a significant negative correlation,is equity incentive increases to a certain extent be able to curb excessive investment in listed companies.Overinvestment does reduce the profitability of the enterprise.Enterprise Equity Incentive of Listed Companies of enterprises excessive investment and profitability of the business relationship with significant regulatory role.The last part of the article gives the corresponding conclusions,and propose targeted recommendations,specific proposals include the development of a viable equity incentive plan,equity incentive improve relevant laws and regulations,improve the investment decision-making procedures,effective governance over-investment,improve the capital market structure and cultivating outstanding professional managers to enhance their information disclosure.