An Empirical Study On The Effect Of Equity Incentive Under Constraints

The modern corporate mechanism originates from the theory of separation of powers.Principal-agent theory has become the core subject of company management.Abundant related theoretical results suggested that,the basic method to solve principle-agent contradiction between shareholders and executive is to monitor and incentive.The equity incentive schemes which were designed for tax avoidance have been used as a motivating executive now.They integrate the client and agent's revenue objective and have achieved good incentive in Western countries.In 1993,Vanke successfully implemented the first "staff share plan rules",which is the earliest practice of equity incentive in China.A few corporations continue to try,until the SASAC issued equity incentive supervision rules in 2006.Then this equity incentive method gradually expands the impact of listed corporations.During ten years,related departments have promulgated many criterion and explanatory documents.Macro-policy concerns affirmed the significance of this incentive method.Could the results of the company's practice verify its incentive effect?By collecting the corporation data which issued the equity incentive schemes from 2006 to 2015,taking market competition as a mesoscopic view,this paper examines the incentive effect and the external market constraints and the exercise price how to influence the incentive effect.The results of the empirical test are as follows:1.In the absence of product market competition,the higher level of equity incentive will significantly enhance the company's performance.2.The product market competition is divided into strong restriction group and weak restriction groups,and it's evident that the incentive effect in the higher competition group is strengthened,while it becomes weak in the lower competition group.The test indicates that the degree of competition in the product market can be used as a constraint to supervise the executive who may lead to inefficient management and resource occupation.Thus the higher competition in the external market strengthens the incentive effect,but it's difficult to act similarly in the low competition industry with high monopoly degree.3.After adding the exercise price in the equity incentive scheme to the original test,it's suggested that the higher the exercise price,that is,the more strict constraint,the stronger the weakening effect on the incentive effect,which reflects to some extent the substitution effect to the external constraint condition.The conclusion of the study contributes to design equity incentive scheme and related policy.