The Impact Of Equity Incentive On Company's Long-term And Short-term Performance

Equity incentives originated in the the 1950 s in the United States,later were introduced to China by Vanke in 1993.In 2009,the establishment of the gem opened the period of rapid development of equity incentive in China.Over the past decades,China's rapid economic development asked the practice of equity incentive higher requirements.In order to promote the sustainable development of equity incentive and further standardize the relevant details of equity incentives,in early 2019,the SFC issued a draft called On the Continuous Supervision of Listed Companies in the Science and Technology Industry,which further regulates the details of equity incentives and promotes the sustainable development of equity incentives.In order to realize the positive role of equity incentive,it is necessary for the scheme makers to clarify the incentive factors like aim,model and other related factors.The implementation of equity incentive will have a long and short-term impact on listed companies,not only reflects in the fluctuation of stock prices,which stock price fluctuations can be observed through market reaction,but also reflects in its operating performance,which is generally from the comprehensive performance and financial performance of the two aspects of evaluation.With the adjustment of China's economic structure and the promotion of supply-side reform,the listed companies of Gem have become an important driving force for technological innovation and economic growth in China.Human capital is one of the core competitiveness of gem companies,and the quality of human capital is related to the improvement of independent innovation ability of enterprises,so it is necessary to carry out equity incentive to core employees and executives.The implementation of equity incentive is not only to achieve the strategic objectives of listed companies themselves,but also to speed up the pace of economic restructuring of the country's inevitable choice.As a national key high-tech enterprise listed on the gem,Narada Power Source Company has a certain representativeness,and its implementation of the equity incentive scheme has a certain reference value.Therefore,this paper selects the equity incentive of Narada Power Source Company as the research topic,and examines the long-term market response,comprehensive performance and financial performance of equity incentive events to enterprises.This paper is made up of six parts.The first part is brief introduction.The second part is theoretical analysis of equity incentive.The third part is the analysis of the equity incentive scheme of Narada Power Source Company,which mainly introduces the incentive scheme design and the motivation of incentive scheme.The fourth part is the market response analysis of the equity incentive of Narada Power Source Company.At first,the short-term market response assesses short-term market performance through abnormal yield(AR)and cumulative abnormal yield(CAR),and then compares it with industry mean levels,selected control companies.Then,the long-term market response assesses long-term market performance through purchase and holding rate of return(BHAR),comparing with three different control groups.The fifth part is the long-term business performance of Narada market through the comprehensive performance and financial performance evaluation system.First of all,calculating the economic value added before and after the implementation of equity incentive,analysing its comprehensive performance.Then the financial performance is evaluated by the financial Index analysis method,combined with the industry and the selected control company to carry on the horizontal longitudinal comparison.The sixth part draws the conclusion and makes the suggestion.Based on the study of the long-term performance of the equity incentive of Narada Power Source Company,this paper draws four general conclusions.Firstly,the stock market has a clear positive market reaction to the equity incentive of Narada Power Source Company in the short term,considering this event as good news.Investors are optimistic about the future prospects of the company,which is particularly evident after the incentive is announced.Secondly,the equity incentive scheme of Narada Power Source Company has been leaked before the announcement,which shows that the securities market has not yet effective,and it is necessary to improve the regulations of information disclosure among all the listed companies.Thirdly,the stock market to the South power supply equity incentive presents a positive market response in the long term.Although slow decline still remains,its long-term performance has been continuously improved compared to not only companies from the same industry and do not put forward equity incentive but also the overall level of the whole industry.The market response is still positive,and far beyond the industry average.It shows that the equity incentive event improves the long-term value of Narada Power Source Company and has good guidance and incentive effect.At last,the implementation of equity incentive has a positive impact on the company's comprehensive performance and financial performance,which is conducive to the improvement of the long-term business performance level of enterprises while producing a positive wealth effect.Finally,this paper puts forward six policy suggestions.Firstly,using appropriate equity incentive model,and the model should be suitable for their own actual and external circumstances.By this way,the incentive model can maximize the role of incentive and restraint.Secondly,expanding the scope of equity incentive.The scope can not only include management and the core technical personnel ought to be given into consideration.Giving more attention to the core technology staff can promote the long-term development of the company.Thirdly,improving the construction of reasonable evaluation index value,which can not be limited to the assessment of profit level but the company's strategic objectives and comprehensive performance level should be taken into account.It is conducive to improving the company's long-term performance,to bring wealth effect to shareholders,to achieve equity incentive.The fourth suggestion is to increase of equity incentive period appropriately,which means promoting the long-term sustainable development of the company,increasing shareholder wealth and enhancing the long-term value of the company.The fifth one is to improve the supporting mechanism of equity incentive,which helps achieving the role for the implementation effect.The last one is to form an effective stock market,gradually strengthening the regulations of information system of disclosing and transmitting,which can help improving daily supervision and speeding up the operation of Marketization.Based on this,it is expected that with the help of the case analysis of the equity incentive of Narada Power Source Company,this paper can bring feasible reference opinions to the practice of equity incentive in China.