The Impact Of Equity Incentive On Corporate Performance

The development of enterprises is inseparable from the support of excellent management personnel and scientific and technological backbones,and talents are the core force to drive innovation and ensure the efficient development of enterprises.How to attract and retain talent,drive technological innovation,and achieve long-term corporate goals has become an urgent problem.In order to establish a long-term incentive mechanism for core management personnel and technical backbones,alleviate the agency costs caused by the separation of company ownership and management rights,and reduce the loss of core technical personnel,equity incentives have become an important choice for listed companies.Scholars have come to different conclusions about the impact of equity incentives on company performance,and the mainstream view is that equity incentives have a positive impact on company performance,but the impact of specific industries needs to be further explored.This thesis selects Midea Group,a leading home appliance enterprise that has implemented multiple periods of equity incentives,for case analysis,and studies the causal relationship between equity incentives and company performance based on a large sample of A-share manufacturing industry.Through empirical research,the motivation of implementing equity incentive is proved,and case studies are used to explain how to implement equity incentive to achieve good results.Firstly,the relevant theories and current situation of the relationship between equity incentive motives,equity incentives and company performance were sorted out by literature research method,and then Midea Group,a leader in the home appliance industry,was selected as the case study object,and its financial indicators and non-financial indicators during the implementation of equity incentive were analyzed through vertical self-comparison,horizontal and intra-industry comparison,and the conclusion that Midea Group’s financial performance increased significantly during the implementation of equity incentive and non-financial performance improved comprehensively.In order to demonstrate the causal relationship between equity incentives and company performance,the data of A-share manufacturing listed companies from 2016 to 2021 were selected for empirical analysis,the proportion of senior executives was selected to measure the intensity of equity incentives,the return on total assets and earnings per share were used to measure the company’s performance,and the management expense ratio was selected to measure agency costs,and three conclusions were reached through in-depth research by descriptive statistics,correlation analysis,regression analysis and robustness testing:(1)equity incentives and company performance were significantly positively correlated;(2)equity incentives have a restraining effect on agency costs;(3)Agency costs have a partial intermediary effect in the process of equity incentives acting on the company’s performance.Midea Group’s financial data basically coincides with the empirical results,which proves that the implementation of equity incentives has a positive impact on the company’s performance,and also shows that the selection of Midea Group for case analysis is exemplary.Through Midea Group’s case analysis,combined with empirical research on the relationship between equity incentives in the manufacturing industry and company performance,the following six enlightenments are drawn from companies that intend to implement equity incentives:(1)enterprises should increase the intensity of equity incentives;(2)The enterprise should have a good organizational structure and enterprise system;(3)The setting of equity incentives should match the corporate strategy;(4)Scientific and reasonable performance evaluation indicators should be established;(5)The targets of equity incentives should be multi-level and all-round;(6)A reasonable exercise mechanism should be established.