Equity Incentive, Management Leverage And Corporate Performance

Since the China Securities Regulatory Commission promulgated the "Management Measures of Stock Option Incentives for Listed Companies(Trial Implementation)" at the end of 2005,equity incentives for listed companies in China have gone through more than ten years of development,and the number of listed companies that have planned and implemented equity incentives has increased year by year.With the increasing number of Companies Implementing equity incentives,whether equity incentives can improve corporate performance and what influences the incentive effect of equity incentives is a common concern.Previous literature mostly studies the incentive effect of equity incentives from the perspective of internal governance and external environmental factors.This paper,from a micro perspective,verifies the regulatory role of operating leverage in the impact of equity incentives on short-term and long-term performance of companies.This paper first reviews the domestic and foreign related literature on equity incentives and company performance,operating leverage and company performance,and then analyzes the concepts and related theories of equity incentives and operating leverage,and proposes assumptions based on theoretical analysis and related literature;Then,based on the sample of A-share listed companies that implemented equity incentives for the first time in 2010-2015,this paper tests the impact of equity incentives and operating leverage on company performance through multiple regression.After centralization of operating leverage,the multiplier of operating leverage and equity incentive is included in the model to test the regulatory role of operating leverage in the impact of equity incentive on corporate performance.And use the Chow Test to test whether there is a significant difference between the effect of equity incentives on company performance and the adjustment effect of operating leverage under different equity incentive levels.The results show that the granting of equity incentives has a significant positive impact on corporate performance,and the different incentive levels have different effects on corporate performance.The higher the incentive level,the better the incentive effect on corporate performance.Under the macro-background of the economic downturn between 2010 and 2015,the negative correlation between operating leverage and corporate performance is significant,and the higher the operating leverage,the better the incentive effect will be.The more unfavorable it is to improve company performance.Next,after verifying the regulatory role of operating leverage,we find that operating leverage has a significant reverse regulatory role in the impact of equity incentives on corporate performance,indicating that the higher the proportion of fixed costs and the higher the risk in the cost structure of the company itself,the more unfavorable the positive impact of equity incentives on corporate performance;after dividing the equity incentives into two groups according to the degree of incentives,we find that the higher the degree of equity incentives.The higher the degree of equity incentive,the smaller the reverse regulation effect of operating leverage is,which indicates that the higher the degree of equity incentive,the weaker the reverse regulation effect of operating leverage.