Equity Incentives And Corporate Inefficient Investment: The Role Of Institutional Investors

With the development of modern enterprise system,the phenomenon of information asymmetry and agency is increasingly prominent,which makes the investment decision of enterprises often cannot reach the best state,thus reducing the investment efficiency.Equity incentive plans have made good achievements in solving the problem of enterprise principal-agent.In recent years,with the enactment of relevant policies,more listed companies have begun to implement equity incentive as a means to govern their enterprises.It changes the situation in which managers only bear the risk of operation failure but do not enjoy the benefits of operation success.Achieve the consistency of enterprise value maximization goal.Can equity incentive solve the problem of inefficient investment? What factors can make equity incentive play a role in improving inefficient investment? This paper intends to study the above problems from the perspective of institutional investors.Equity incentive can solve the principal-agent problem of enterprises,but it will also cause problems such as the overconfidence of senior executives and affect the implementation effect.There is uncertainty about the governance effect of equity incentive on inefficient investment,so it is necessary to take measures to ensure the effect of equity incentive.Institutional investors have governance advantages as stakeholders.In recent years,their development shows the trend of diversification,their investment preferences become different,the Angle of attention to the enterprise and the ultimate acquisition of value goals are different.Despite the general perception that they can play a governance role,the current research is inconsistent as to whether it can affect the effect of equity incentive and reduce inefficient investment.Therefore,it is necessary to consider the role of institutional investors in the influence of equity incentive on inefficient investment.In this paper,samples of Shanghai and Shenzhen A-share listed companies from 2012 to 2021 are selected as the observation interval.Firstly,inefficient investment data are calculated and divided into two groups of samples according to overinvestment and underinvestment,and then empirically test the influence of equity incentive on inefficient investment.Then we introduce the shareholding factors of institutional investors to test its regulatory effect,and divide institutional investors into different criteria to test its regulatory effect.Finally,to make the findings more stable,robustness tests were conducted and the samples were classified according to the nature of property rights for further analysis.The main conclusions of this paper are as follows:(1)Equity incentives can exacerbate corporate overinvestment and inhibit corporate underinvestment.(2)Institutional investors can significantly inhibit the overinvestment caused by the equity incentive,but has no significant effect on the underinvestment caused by the equity incentive.(3)Pressure-resistant institutional investors can inhibit the over-investment caused by equity incentives,but also inhibit the effect of equity incentives on the governance of under-investment,while pressure-sensitive institutional investors in the correlation between equity incentives and inefficient investment is not significant.(4)Stable institutional investors can restrain the excessive investment caused by equity incentives,but also restrain the effect of equity incentives on controlling underinvestment.(5)The relevant analysis conclusions of this paper are more applicable to non-state-owned enterprises,and the influence of equity incentive on inefficient investment in state-owned enterprises is not obvious.Finally,this paper gives some suggestions from several aspects: First,the enterprise should optimize the equity incentive plan according to the actual situation,and the equity incentive is more suitable for the management of the phenomenon of enterprise under-investment.Second,enterprises can make reasonable use of the restraint effect of institutional investors on the management.When the problem of excessive investment occurs due to the implementation of equity incentives,they can make reasonable use of the power of institutional investors to produce some restrictions on the management.Third,the regulatory authorities should pay attention to optimizing the structure of institutional investors,guide institutional investment to maintain a pure investment relationship with the invested enterprises,and focus on developing institutional investors with long-term shareholding.