Research On The Impact Of Executive Equity Incentives On The Investment Efficiency Of OFDI Enterprises

Principal-agent problem between shareholders and management and contradiction of control between internal person are highlighted when the ownership is dividing with management power,which is especially remarkable in the overseas investment environment.The frequent failures of "Going Out" enterprises in China can also be the exact proof of the value of discussing incentives for executives.Therefore,an effective Incentive System for executive is key for enterprises to succeeding in situation of investment environment which features asymmetry of information and higher risk of investment abroad.As a long-term incentive mechanism,the status quo and the effect of equity incentives for senior executives should be focused.This paper takes Hikvision as a classical study case to of "Going Out" enterprises by tracking the changes of investment efficiency during the years(2012-2018)in which its incentive solution had been changed.Firstly,this paper analyzes the background and motivation besides the process of equity incentives in Hikvision.Then,the paper analyzes the impact of the implementation of equity incentive on the investment efficiency of enterprises by using the quantitative method of alternative indicators,and concludes that the executive equity incentive significantly improves the current performance-oriented investment efficiency and inhibits the tendency of non-efficient investment.Lastly,for the universality of research papers and recommendations,the paper combines examples of Shanghai Stock Exchange and Shenzhen Stock Exchange,build a new model of investment efficiency inspired by Richardson(2006)model,to reach the universal conclusion.Analysis results show that equity incentive is negatively related to the inefficient investment clearly.It is consistent with the result of the case.The innovation and contribution of the paper are that it combines a classical case with regression analysis to discuss the relationship behind the Chinese OFDI(Outward Foreign Direct Investment)enterprises,deeply discusses the influence of equity incentive on investment efficiency of Chinese OFDI enterprises from a point to a surface and gives the OFDI enterprises some useful suggestions.