Studying The Impact Of Big Shareholders' Control Right On Effect Of Equity Incentive

In 2006,China introduced the equity incentive mechanism,so far more than 1,300 equity incentive programs has been launched,at the same time,the study of equity incentive mechanism is also in continuous development,however,the perspectives of effect of the implementation of equity incentive mechanism are ununified.At present,the shares of China's listed companies are still tend to centralize,and the " dominance" phenomenon is widespread yet,the large shareholder is still in the absolute superior position in the listed companies,so when studying the effect of equity incentive,the control rights of big shareholdersshould be taken into account.Focusing on the reality that the centralization ratio of shares of listed companies in China is always high,this dissertation studies the influence of the controlrights of large shareholders on the effect of equity incentive based on the theories about corporate governance theory,human capital theory,principal-agent theory and large shareholder incentive effect and trenching effect hypothesis.First,it proves that the company value can be used as an alternative variable of the effect of equity incentive effect by verifying the positive correlation between equity incentive and corporate value,which lays the foundation for the subsequent research;secondly,it discusses when the large shareholder has the weak control right,the relative control right or the absolute control right whether has influence on the effect of equity incentive,which is verified by establishing multiple regression model and using the multiple regression analysis method.The conclusions of this dissertation are as follows:(1)From the regression results of the effect ofequity incentive,the implementation of equity incentive can promote the improvement of corporate value significantly.(2)Through the regression analysis of three cases: weak control right,relative control right and absolute control right of the big shareholders,we can get conclusions that when the big shareholders have weak control,the effect of equity incentive don't work well.When the major shareholders have relative control,the major shareholders have the motivation and the ability to actively play their own supervisory role,The control rights of large shareholders promote the effect of equity incentive.When the major shareholders have absolute control,the large shareholders also played a positive role,The control rights of large shareholders promote the effect of equity incentive.(3)The relative control and absolute control of the major shareholders will promote the effect,but according to experiences,the major shareholders have absolute control will not only boost the enthusiasm of supervision of major shareholders but also increase risk of interest encroachment,and the counterbalance role of other shareholders almost impossible to play,so some potential risks exists under the majority of shareholders with absolute control implementing equity incentive.In the case of the relative control of the major shareholders that is the common ownership structure of listed companies in China,the implementation of equity incentive is conductive to avoid the risk of “dominance”,and also contributes to decrease the threats of the management that caused by dispersed ownership structure.Therefore,only when the major shareholders have the relative control,the implementation of equity incentive mechanism will maximize the effect of it.(4)Both state-owned and private listed companies will promote the company's value,but the control rights of the large shareholders in the state-owned listed companies have no significant effect on the incentive effect.The main innovation of this article isdivide the control right of large shareholders into three categories according to the proportion,that is weak control,relative control and absolute control,to study the influence of large shareholders' control on the effect of equity incentive.It is on the basis of previous research on the control of large shareholders and the effect of equity incentive is Suppressing or Promoting,and the influence of equity structure difference on equity incentive mechanism is considered.The research enriches the perspective of the study of the relationship between the control rights of large shareholders and the effect of equity incentive.