Research On The Effect Of Implementing Equity Incentive Scheme Under The Background Of Family Elimination

As an important part of private enterprises,the development of family enterprises has an extremely important impact on China’s economy,also is an important driving force for sustained economic growth.With the change of the economic environment,traditional family enterprises in China are undergoing institutional and professional management reform.Transferring the leadership from fathers to sons is not the only way to inherit the family business At present,some family businesses conduct family elimination by introducing professional managers or gradually transferring ownership."Family elimination" is a hot topic in academic research.In order to improve the corporate governance structure,some enterprises will adopt equity incentive to alleviate the principal-agent problem.An effective way to alleviate the principal-agent problem is equity incentive.Can the equity incentive plan implemented by the de-family enterprises play a real role in motivating the managers and creating wealth for the shareholders and the enterprise? Can it effectively alleviate the principal-agent problem of family business after family removal? This paper selects Midea Group which implements equity incentive after family elimination as a case study,because Midea Group is a typical enterprise to reduce family ownership by introducing external professional managers.After Midea Group went public in 2013,it officially completed the family elimination.Since 2014,Midea has implemented three different modes of equity incentive plan,involving 14 times.This paper compares the specific contents of the14 times of equity incentive plans.By comparing the specific contents of the 14 times of equity incentive schemes,the paper analyzes the effect of equity incentive after "de-family" from the perspective of financial performance and non-financial performance.Financial performance analysis including the profit ability,debt paying ability,operation ability,development ability,and is divided into vertical and horizontal dimensions.This paper compares the trend of financial indicators of Midea Group from 2014 to 2018.In order to more accurately reflect whether the change of Midea Group’s performance is affected by the industry,a horizontal analysis is also conducted to compare Midea Group with manually collated industry data.Non-financial performance analysis is conducted from the perspectives of short-term stock price fluctuations,r&d innovation,talent quality,agency cost and agency efficiency,and economic value added.Event study method is used to analyze short-term stock price fluctuations and evaluate market reactions.Through the analysis,it is found that the implementation of equity incentive after family elimination significantly improves the performance of the enterprise and reduces the agency cost.Through the analysis,it is found that there are three shortcomings in the incentive design of Midea Group’s equity.First,the design of incentive plan needs to be improved,including short term of validity,single assessment index and loose exercise conditions.Second,the matching degree of incentive mode selection is low;Third,the enterprise internal and external supervision is limited.Finally,three Suggestions are put forward to solve the problems.First,improve the equity incentive plan,such as moderately extending the incentive period,establishing a diversified assessment system,and setting reasonable exercise conditions.Second,to improve the matching degree of incentive pattern;Third,give full play to the role of internal supervision.Through the research on the equity incentive scheme implemented by the defamily enterprises and the implementation effect,it provides a reference for the traditional family business to consider the transformation in the future and to design the equity incentive scheme.