A Study On The Short-term Effect Of Equity Incentive Of Listed Companies In China And Its Causes

Principal-agent problem is one of the most important problems in corporate management.Choosing a suitable incentive method to make the business interests of business managers and shareholders in general is a key way to solve the principal-agent problem.Equity incentive is an effective way to solve the problem.In Europe and the United States and other developed capital markets,equity incentive has been extensively used and achieved better results.In contrast,the development of equity incentive of listed companies in China started late.In 2006,China Securities Regulatory Commission promulgated the “Measures on the Administration of Equity Incentives of Listed Companies(Trial)”,which can be regarded as the starting point for lead equity incentive system into the Chinese market.From then on,the equity incentive quickly and broadly concerned by the market.Over 900 listed companies have announced an equity incentive plan.How to select a reasonable approach to maximize the incentive effect,these issues have become the most concerned about China's listed companies.Most of the existing research are on the relationship between equity incentive and long-term performance of enterprises.The impact of equity incentive on short-term stock price is called short-term effect of equity incentive.Both the long-term performance and short-term stock price is the measure of equity incentive effect,the former is measured through a direct perspective,while the latter is through an indirect opinion,reflecting the market investors' expectations of the future value of the enterprise.Therefore,the study of short-term effects of equity incentive has played a useful complementary role in the long-term performance-related research of equity incentive.The short-term effect of equity incentive is relatively few,and often the time span is earlier and the sample size is smaller.So how takes care of the short-term effect of equity change over time,how does it change? In the past,whether the conclusions of the classic study of the recent introduction of an equity incentive plan of listed companies still apply? This is the issue to consider in this article.This paper first summarizes the theories of principal-agent theory,human resource theory and market signal.On this basis,this paper reviews the domestic and foreign scholars' research on equity incentive mechanism.Then,the paper analyzesthe short-term effects of equity incentive of Chinese listed companies by using event research method,and 700 listed companies which published equity incentive plan from 2006 to March 2017.The study has concluded that the short-term effect of China's overall equity incentive is positive.In the vicinity of the event day,there is obvious short-term effect of equity incentive in China,but this effect is mainly reflected on the event day,and is not obvious from 3 to 10 days after the event day.Before the event day of the stock market has a more obvious response,which shows the existence of information disclosure in the Chinese market situation.And the short-term effect of stock options' incentive is better than that of restricted stocks'.In addition,through the time goes,the short-term effect of the equity incentive is declining.In recent years,market feedback of company launching is far less than a few years after China promulgated the pilot.This is a wake-up call for companies that will be issuing an equity incentive plan in the future.In the case of a gradual reaction to the market,companies need to adopt more rational and effective incentives to gain market confidence,and the reason for this is worthy to research.This article has made further study of this problem.This paper starts from the two aspects of the growth and stability of the firm,and divides the two variables into the overall environmental aspects and the individual dimensions of the enterprises respectively.Then find relevant agent variables to study their trends with time and their short-term effect of the effect.It is noted that the growth and stability of the enterprise are gradually decreasing with the passage of time,and the growth and stability of the enterprise also have a definite correlation with the short-term effect of the equity incentive.Therefore,this paper concludes that the growth and stability of the firm can partly explain why the short-term effect of the enterprise's equity incentive decreases by the time goes.In addition,it also concludes that the macroscopic agent variable which describes the general trend of growth and stability of the firm is stronger than the microscopic agent variable which describes the tendency of individual growth and stability.This shows that the fluctuation of the stock price is changing trend by macro-environment relatively more sensitive.And the impact of individual's growth and stability is relatively weak.This shows thatcompanies need to transfer more of their own development characteristics as a signal to the market.Through the conclusion of this paper,we can make a reference for the enterprises that will issue the equity incentive plan in the current environment: the enterprise should start from its peculiar development point and enhance its own growth and stability.In the choice of equity incentive plan,the incentive plan will be tested by the market,the implementation of such incentive programs should be carefully considered,and a relatively short period of incentive programs should be used more;the same time,enterprises should make more information exchange with the market,increase the influence of its internal development information on market investors.There are also some suggestions for government management: such as the establishment of a more perfect market supervision mechanism,and strengthen supervision;to guide the market to reorganize non-performing assets;improve the transparency of market information requirements.The research in this paper starts from a realistic phenomenon,and finds out a factor influencing the short-term effect of the equity incentive for the enterprise,and makes a certain explanation of the phenomenon.This is the supplement and improvement of the theory of equity incentive,and provides some suggestions on the choice of equity incentive plan and the development of enterprise.The theory in this paper needs to be further tested and become better,and its research path needs to be further improved and optimized,and strives to explore a more applicable,more interpretive research results.