Incentive Effect Of ESOP In Mixed Ownership Enterprises

The ESOP refers to a system for employee to enjoy the shareholders' rights and interests by subscribing the company's shares.With the publish of "the decision of the Central Committee of the Communist Party of China on a number of major issues in the overall deepening of reform" on the third Plenary Session of 18th CPC central Committee,this document clearly points out:"Allow the mixed ownership corporate to implement ESOP,and form an interest community of capital owners and the labor owners." Many companies have begun to implement ESOP.Then,under the unique institutional background of China,does ESOP have incentive effect?What is the mechanism of the incentive effect?What are the factors that affect the incentive effect?These are the key issues in the paper.Firstly,this paper summarized the related research of ESOP on three aspects,which are incentive on financial,incentive on corporate governance,and the influence factors on the incentive effects.Then the paper clarifies the research context of the existing literature,and analyzes the shortcoming of the existing research,based on which,determine the research perspective of the paper.Secondly,based on the correlation theories,including dual factor theory,profit sharing theory,principal-agent theory,stakeholder theory and incentive theory,the paper analyze the incentive effects of ESOP and the influence factors.Through analysis,the paper thinks that there are two kinds of mechanisms of ESOP incentive effect,namely direct incentive effect and indirect incentive effect.The direct incentive effect refers to the construction of the "interest community",which makes the employees and the enterprise's interests converge and directly improves the enterprise performance.The indirect incentive effect is to improve the performance of the enterprise indirectly through the improvement of the corporate governance structure.On this basis,the factors that influence the incentive effect are analyzed from two aspects:external factors and internal factors.Thirdly,case study method is used to analyze the Wuchan Group's ESOP cases.On the one hand,the paper analyzes the ESOP scheme,introduces the design of ESOP,the implementation progress and the participants.On the other hand,the paper analyzes the impact of ESOP on the governance structure;then analyzes the incentive effect of ESOP.The paper makes a contrast on the market reaction,profitability,operating ability and solvency ability of Wuchan Group.Through analysis,the paper thinks that the implementation of ESOP improves corporate financial performance.Finally,based on the research on the incentive effect of ESOP,the paper provides some guidance for other enterprises to carry out ESOP,from the angle of strengthening the incentive effect.In the process of research,the paper has the following innovations:First,the paper pays great attention to the innovation of research perspective.The paper studies the mechanisms of the incentive effect of ESOP from two different perspectives,namely financial performance and corporate governance,which enriches the theoretical research on the incentive effect of ESOP.Second,the paper focuses on the innovation of the research method.This paper uses case analysis method and makes an in-depth analysis on the ESOP of Wuchan group.Further,the paper puts forward some practical guidance for the state-owned enterprises to carry out ESOP.Third,the impact of institutional background on incentive effect is fully considered.Unlike western countries such as Europe and the United States,China's ESOP is implemented under the system of mixed ownership reform,which requires us to consider the impact of China's special institutional background on the incentive effect.