Empirical Study On The Choice Behavior Of Market Timing Of Equity Incentive In Stock Exchanges

As an important way of managerial incentives to mitigate the issue of principal-agent between business owners and management and enhance corporate value,the benefits and cost of the manager is closely related to the market price of the enterprise stock during the equity incentives.However,in the existing capital market environment,stock market is not yet mature,investors’"herds behavior " is serious.A large number of the same type of trading led to the stock price crash,and a serious deviation from the company value.Thus the phenomenon that the stock was overvalued or underrated often exists.As the insiders,corporate managers have a more clear understanding of corporate value and can be more rational to understand the intrinsic value of the company.We can assume that as the key makers and implementers of the equity incentive program,company executives have chance to maximize their own interests by the use of stock prices and the deviation of the inherent value.When the stock price is overvalued,company executives tend to reduce the intensity of equity incentive,vice versa.Under the situation,the equity incentive programs cannot have a stimulating effect and can even expand the agency problem,which is our main concern in this study.Effective corporate governance system can alleviate the principal-agent problem between shareholders and management and curtail management opportunistic behavior.Therefore,we also test whether the corporate governance has played a corresponding role in the process of equity incentive plan to curb the possible selfish behavior and promote the effective implementation of equity incentive system.Based on the above problems,this paper sets up multiple regression model using the data of 802 equity incentive plans from the 665 listed companies in Shanghai and Shenzhen.The model use MB and previous year’s cumulative monthly income as a substitute for the timing of the market variables to test the existence of market timing choice behavior while testing whether the level of corporate governance can curb the selfish behavior.It is found that:(1)There exists the choice behavior of market timing during the announcement of the equity incentive plan in our country.The higher the degree of stock price is underestimated,the greater the incentive intensity of the stock and vice versa.(2)China’s independent director system has played a supervisory role to a certain extent.The higher ratio of independent directors can restrain the market timing choice behavior in the equity incentive scheme,which confirms the validity of the independent director system construction.(3)Compared with the state-owned enterprises,private enterprises have a stronger equity intensity and have obvious market timing choice behavior.