Research On The Risk Control Of ESOP In Jinlong Electronic Co.,Ltd.

Under the modern enterprise system and environment,how to alleviate the principal-agent contradiction in order to achieve the "win-win" between the owner and the operator of the enterprise has always been a hot topic of theoretical and practical scholars.ESOP,as a new form of equity incentive,has been studied for many years by scholars at home and abroad.It is believed that ESOP can play a positive role in motivating employees,improving business performance and governance level.In China,compared with the traditional means of equity incentive,ESOP has greater flexibility in policy,so it is favored by many enterprises,and the implementation climax of ESOP is also ushered in in China.However,with the deepening of the implementation,many listed companies failed to achieve the original intention of setting up ESOP.On the contrary,the phenomenon of floating loss,compulsory position closing and "position explosion" appeared,and risk events were frequently revealed.Based on this abnormal phenomenon,this paper selects Jinlong Machinery and Electronic Co.,Ltd.,the first listed company to be sued by the third-party asset management agency due to the passive closing of ESOP,as the research object.Through the analysis of the failure cases of the implementation of the ESOP,this paper explores the hidden risks and the causes of the risks behind the ESOP,and provides suggestions for other listed companies,policy makers and regulators to control the risks of the ESOP.In order to provide a reference case for the application of ESOP in Chinese listed companies.Firstly,this paper introduces the concept,connotation and related theories of ESOP,which provides a theoretical basis for the case analysis in the following paper.Secondly,taking Jinlong Machinery and Electronic Co.,Ltd.as the research object,this paper first gives a brief overview of the basic situation of the company,and then introduces the implementation process and scheme design content of its ESOP.Then,it analyzes the motivation of the implementation of the ESOP of Jinlong Machinery and Electronic Co.,Ltd.and evaluates its implementation effect from three perspectives of the company,employees and controlling shareholders by using the financial index method and event study method.Then,this paper analyzes the risk of the company’s poor implementation of the ESOP.On the basis of identifying and summarizing the four types of risks of the ESOP,it explores and analyzes the sources and causes of the risks from both internal and external aspects.Finally,combined with the risk analysis of the case,this paper provides suggestions on risk control of ESOP for other listed companies,policy makers and regulators.The results show that part of the purpose of ESOP is for short-term investment and market value management,which implies bad motivation.Therefore,there is a lack of consideration for the content of ESOP design,which leads to a variety of risks in the implementation process of ESOP.In addition,the external policy and market environment as well as the level of corporate governance are also the sources of risk.Therefore,this paper provides risk control suggestions from the perspective of listed companies themselves,policy makers and regulators,and third-party asset management institutions.Listed companies can control or prevent the risks of ESOP from reasonable scheme design and improving the level of governance;policy makers and regulators should coordinate the top-level design and detailed specification of the relevant legal system of ESOP,and the third-party asset management institutions should strengthen due diligence.