Research On The Impact Of Equity Incentive Programs On The Company's Financial Policies And Performance

Half a century ago, European countries began to use equity incentives as a means of corporate governance. The essence of equity incentive is to grant stock to the management, so that managers have the right to share the remaining value of the company as the real company owner,in order to stimulate the manager to improve the production and operation efficiency, and reduce the possibility of manager's adverse selection because of moral hazard,to achieve the maximize of the company's long-term value.With the equity incentive plan's widely used in China's listed companies these years, the scholars are discussing whether the design of its programs will affect the management's financial policy,and then have an effect on the company's performance.The equity incentive plan actually obtain some success in specific practice and stimulate the enthusiasm of the staff, improve the performance of the company, but there are also many problems such as: the assessment indicators of the equity incentive setting too high can hardly incentive the management, the assessment indicators of the equity incentive setting too low would be considered in disguise of the payment benefits for the management; when the exercise is more concentrated, it is likely to lead to a loss of performance of the company; when the valid of equity incentive is too short, managers are likely to generate short-sighted behavior in order to meet the financial performance agreement,this will increase the company's business risk,and harm the interests of shareholders. We made 158 sets of equity incentive program in 2013, but 22 sets of them has been terminated in less than two years.It shows that the widely use of equity incentive program does not guarantee the desired effect.The study method of this paper is case study, first introduce the current research scholars made on the relationship between equity incentive plan's disclosure and its performance, then comb the theoretical basis of equity incentive,then made a study on Sofia's equity incentive program in 2013, strictly in accordance with the logic of what the management's behavior will be affected by the impact of the equity incentiveprogram, and how the company's performance will be affected by the management's behavior. This article divide the financial policy managers made to two aspects, long-sighted policy and short-sighted policy, and divide the performance of the company to financial performance and market performance,and then evaluation both of them. It can be ultimately concluded that Sofia's equity incentive program significantly improved the company's performance in 2013, but the management still make some short-sighted financial policies, which suggested that there is still room for improvement on Sofia's equity incentive plan.I hope that it can be possible to promote rationality on the design level of the equity incentive plan,and make equity incentive really become a favorable method on the long-term development for the company, finally provide some feasible suggestions for the companies which want to improve performance through equity incentive programs.