Research On The Effect Of Executive Stock Option Incentive On Corporate Performance And Accounting Information Quality

In the 1990 s,the equity incentive system was widely used in developed countries.China has begun to implement the equity incentive system exploratory,and implemented Management of Equity Incentives for Listed Companies(Trial)in early 2006.With a series of supporting measures of that and the formal Management of Equity Incentive of Listed Companies released,the number of listed companies implementing the equity incentive plan in China has become increasingly large.However,companies like Erie and Watson Biological and some others termed their implementation of equity incentive plan for various conditions,it is not a smooth sailing because of the imperfect market,unreasonable equity incentive program and unsound corporate governance structure.All these cases make it necessary to study the operation mechanism of the equity incentive system and how to play its role in the market of our country.Based on the theory of principal-agent theory,human capital theory and management incentive theory,this paper makes an in-depth theoretical analysis on operating principle and condition of equity incentive system,and conducts empirical test on the effect of executive equity incentive on corporate performance and accounting information quality from the whole and internal structure of incentive program respectively,and something are found: Firstly,executive equity incentive will enhance corporate performance in short time but leading to the decline in the quality of accounting information simultaneously,which doesn't exist with the end of the incentive plan.Second,there is a significant positive correlation between equity incentive and firm performance and a negative one with the quality of accounting information.Third,stock options tend to make executives appear short–sighted like Earnings Management in contrast to restricted stocks.Fourth,the development stage of companies should be considered when choosing equity incentive mode.Fifth,the benefit to the improvement of company performance and accounting information quality is long-term if extending the incentive period or improving performance standards appropriately.Finally,perfect internal control structure is essential to promote corporate performance and accounting information quality,and to guarantee the effectiveness of the equity incentive.This paper puts forward some suggestions on how to improve the implementation effect of executive equity incentive of listed companies in China from three aspects of market construction,equity incentive plan design and internal governance,which is strengthen the capital market and human capital market construction,Select the incentive for their own characteristics,appropriate to extend the incentive period,improve the exercise of standards,and give full play to the supervisory functions of independent directors,supervisors and internal audit institutions.