The Relationship Between Equity Incentive And Investment: Based On Perspective Of Risk-taking

Investment can be recognized as an important guarantee of enterprises' future development and cash flow growth,which is at the core of the three financial behaviors and a direct impact on the decision-making behavior of enterprise value.Nevertheless,the ‘Agency Theory' said that the conflict of interest between executives and shareholders would lead to deviation from the optimal investment strategy.Therefore,equity incentive as an effective means to ease the problem of agency is in focus of theorists and regulators.Since 2005,Chinese capital market began to enter the era of equity incentive until the securities regulatory commission promulgated the measures for the management of the listed company equity incentive(try out).However,both the development of equity incentive system,capital market and legal environment were all in the immature and unstable stage.At the same time,the overall investment of listed company in China also presents the polarization situation.On one hand,unlimited expansion on some areas and excessive capital investment make the resources waste seriously.On the other hand,in the new and high technology industries such as research and development and innovation of a serious shortage of inputs,hindered the long-term development of enterprises.In this research,based on the perspective of risk-taking,it proposed equity incentive to affect corporate investment by adjusting risk preference conflict between executives and shareholders.On the perspective of risk-taking,equity incentive by linking enterprise risk with the executives personal wealth to encourage executives to raise the responsibility for risk exposures and to improve the full use of investment opportunities.In addition,introducing the theory of investment options in the measure of risk index of Vega to measure equity incentive for the role of risk bearing strength.On the analysis of the research and development expenditure and capital expenditure on the basis of differences in terms of risk income effect,equity incentive is put forward for the research on the effects of different assumptions and it is further discussed about risk preference difference under two kinds of situations-investment shortage and excessive.According to the polarization of investment in China,this research clarifies the influence of the equity incentive for enterprise's investment efficiency and proposes hypothesis.In empirical aspect,this paper selected all A-share implementation of equity incentive of listed companies from 2006 to 2014 as the research object,and established a multiple linear regression model.Eventually main research results are listed:(1)On the risk perspective,equity incentive raise the R&D investment and capital investment in parallel,and thus improving the overall level of investment of enterprises;(2)Considering the R&D investment capital investment risk is high,in the perspective of risk exposures,equity incentive effect on the improvement of R&D investment stronger than on capital investment;(3)For the situation that CEOs are risk averse,excessive equity incentive could not significantly reduce the shortage problem.(4)excessive equity incentive could increase the excessive investment of the enterprise.