Research On Relationship Between Equity Incentive And Corporate Performance Under Strategic Change

At present,China's economic growth has slowed down.Many companies whose rapid development relied on high economic growth in the past are facing critical moment,or even bankrupt.In order to survive in this difficult period,many companies are going through strategic transformation hoping to regain a competitive advantage.Many of them choose a diversified strategy,trying to diversify the non-systematic risk.However,because the diversification strategy involves entering new areas,the risk is higher than other strategies.Through the analysis of ALCHA's equity incentive,it is found that there are certain risks in the implementation of the equity incentive in the context of the diversification strategy,especially the company whose original business area is in danger and eager to restructure business through the diversification strategy.Such firms' equity incentives are relatively unattractive.In order to maintain the stability of the management team,equity incentive may become employee welfare.Under strategic change,it is difficult to distinguish if an equity incentive is actually an employee welfare.Because such enterprises usually involve a series of mergers and acquisitions business,and these businesses will make the company's performance,capital structure and governance structure change.Therefore,it is hard to find out through analysis.This article further analyzes the reason why ALCHA made equity incentive an employee welfare.It is found that the motives of employee welfare will have a great influence on the follow-up development.If this action was based on strategic positioning considerations,and to prevent the loss of core personnel,the companies may still successfully go through the strategy transition period.However,if the equity incentive is only a tool for executives to gain profit,and has nothing to do with the strategic positioning,it will seriously damage the interests of small shareholders.