Research On Equity Incentive Scheme Without-ultimate Controlling Owner

The previous literature shows that there are two hypotheses regarding the role of controlling shareholders in corporate governance: one is the "supervision hypothesis",which holds that controlling shareholders can supervise the management and alleviate the first-type of agency problem;the second is "supervision hypothesis".According to this hypothesis,since the interests of controlling shareholders and minority shareholders are inconsistent,controlling shareholders also have the motive to grab their own interests by hollowing out listed companies and encroaching on the interests of minority shareholders.And the "appropriation hypothesis" is also considered to be the second-type of agency problem,that is,the agency problem between large shareholders and small shareholders.Based on previous studies,due to the late start of China’s capital market and the short time for companies to go public,controlling shareholders generally exist in listed companies.Previous studies naturally paid more attention to the second-type of agency problem,while ignoring the role of controlling shareholders to check and balance the management.However,with the development of China’s capital market,due to various reasons,some listed companies have no ultimate controlling owners.In 2008,there were 31 Shanghai and Shenzhen A-share listed companies without-ultimate controlling owners;but as of 2019,the number of Shanghai and Shenzhen A-share listed companies without-ultimate controlling owners has increased to 244,accounting for 6.43% of all A-share listed companies.So,do these listed companies without-ultimate controlling owners show the worsening Type I agency problem?On the basis of combing and reviewing the existing literature,this paper analyzes based on the two-factor theory and principal-agent theory,and believes that in the absence of ultimate controlling owners,the company’s equity structure is relatively dispersed,and major shareholders lack the motivation to supervise the management.Enterprise management is more likely to frequently manipulate the company’s equity incentive plan based on self-interested motives,which leads to a more serious Type I agency problem of the company.In order to further reveal the internal mechanism of the problem,this article chooses the final failure of the equity incentive plan launched by Walvax,a listed company without-ultimate controlling owners,as the case study object.It is found that without-ultimate controlling owners,the corporate governance model is not yet mature.If the management has very strong power,then the risk of "inside control" will increase,which will make equity incentives a tool for the self-seeking of executives,increase the company’s Type I agency costs,and reduce the efficiency of equity incentives.The possible contribution of this article lies in: From a theoretical point of view,on the one hand,China’s capital market is becoming more and more mature.As the founding major shareholders of enterprises gradually withdraw,there will be more and more listed companies without-ultimate controlling owners.Then,correspondingly,we must pay attention to whether the agency problem of this type of listed company in corporate governance will show new characteristics.The empirical evidence provided in this article shows that listed companies withoutultimate controlling owners have generally begun to experience worsening Type I agency problems,which also happens to prove that controlling shareholders can indeed alleviate the company’s Type I agency problems by restricting the power of management.On the other hand,this article is also a certain supplement to the equity incentive literature.Previous studies have shown that major shareholders can effectively supervise management and ensure the effectiveness of equity incentives.The empirical evidence in this article proves the above view through the effectiveness of corporate equity incentives without-ultimate controlling owners.From a practical point of view,with the development of China’s capital market,more and more listed companies without-ultimate controlling owners will appear.Forming effective checks and balances will be a key governance issue for such listed companies.The empirical evidence in this article also provides ideas for how to alleviate the first-type of agency problem that has gradually become prominent.