The Theory And Empirical Research On The Exercise Pricing Of Stock Option Incentive Contracts In China

Equity incentive is an effective way for the company to solve the principal-agent problem.The value of the exercise price directly determines the amount of the manager's equity incentive income,so the exercise pricing is the core link of the equity incentive contract design.At present,in the practice of equity incentives,there are phenomena such as the time selection on the announcement date,high send shares in incentive periods,and executives' manipulation of earnings per share.The essence is to manipulate the exercise price by unreasonable means,aiming at improving the exercise income of equity incentives.However,the fixed exercise pricing method generally adopted in equity incentive contracts cannot match the relationship between the stock price and the manager's income,nor can it achieve the equivalence between equity incentive income and risk.The performance of the exercise price that is too rigid during the incentive period cannot ensure that the manager is not affected by the common factors beyond its control,and violates the principle of relative performance evaluation,so that the equity incentive cannot fully exert the incentive effect.The indexed pricing scheme can better remove the influence of systemic factors,but it has not been widely accepted and applied in practice.The research on the influencing factors,incentive mechanism and incentive effect of indexed exercise pricing needs to be further deepened and improved.This paper focuses on the incentive mechanism,incentive effect and application promotion of indexed exercise price in the exercise pricing of equity incentive contracts.In the analysis of the indexed pricing mechanism,firstly,we construct the single-index absolute exercise price,the single-index relative exercise price,the multi-index absolute exercise price and the multi-index relative exercise price model.On this basis,the company's stock price is indexed.Decomposition to reveal the internal mechanism of exponential pricing;then,using numerical analysis methods to study the influence of parameters such as correlation coefficient,risk-free interest rate,stock price volatility,index volatility,stock dividend rate and index red interest rate on the exercise price;Sensitivity analysis was carried out for the B-S option pricing formula and the indexed stock option pricing formula respectively.The magnitude and characteristics of the incentive strength of different pricing methods were analyzed by(35)value comparison.Finally,for the examples used in the relevant authoritative literature,the same conditions are used for different durations of exercise,the absolute(relative)exercise price of single index and the absolute(relative)exercise price of multi-index are compared and compared.This paper analyzes the incentive effect from the perspectives of managers and companies,and studies the changes in the degree of effort and risk tolerance of managers in the stage of equity incentive investment,and the impact of the exercise price on the company's performance,innovation ability and earnings management..Aiming at the characteristics that the effort level and risk tolerance are not easy to quantify,the game analysis method is used to construct the principal-agent model of the equity incentive item based on the Holmstrom-Milgrom parameterized model.Under the conditions of information symmetry and information asymmetry,the analytic forms of manager's effort and risk tolerance in the classic model and the improved model are compared and analyzed,and the incentive effect of equity incentives on manager's work input is theoretically demonstrated.The research shows that the manager's optimal effort level is less than or equal to the manager's optimal effort level under the condition of incomplete information,and even if the risk is disgusted under the incomplete information condition,the manager must bear part of the risk.Under the condition of incomplete information,the introduction of equity incentives will not only increase the level of manager's efforts,but also increase the risktaking ratio of managers.At the same time,managers' income will be compensated accordingly through the exercise of equity incentives.In the empirical analysis of the effect of exercise price on equity incentives,the exercise price difference ratio is constructed as the exercise price index,and the management shareholding ratio reflects the intensity of equity incentives from different angles,making up for the incentive intensity in existing research.The number ignores the lack of unit incentive strength.For the impact of the company's output,the company's performance is chosen because it is the most direct and widely used indicator of the incentive effect.Because the exercise price is too high and too low will hinder the company's performance improvement,so the multi-dimensional fixed-effect model is used to construct the nonlinear panel measurement model of exercise price and company performance.Innovative ability is the decisive factor for the company's future development potential and industry status.Under the background of “popular innovation,entrepreneurship”,listed companies should take effective measures to achieve sustainable innovation output.This paper uses the panel Logit model to test the impact of the current stage of equity incentive exercise pricing on innovation ability,and interpret the regression results through the odds ratio.On the other hand,it is known from the manager's defense theory that equity incentives may induce or increase the manager's earnings management level.Earnings management is a way for executives to use information to select financial disclosures that are beneficial to their own earnings.It is essentially an information distortion.The impact of equity incentives on earnings management is to examine the effect of equity incentives from the perspective of the negative effects of equity incentives,thus making the research conclusions more comprehensive.China's equity incentives started relatively late,and the determination of exercise price was based on imitating foreign experience.At present,the situation of using indexed exercise pricing in the implementation of equity incentives of listed companies in China has not been found,indicating that the application of indexed exercise pricing has lagged behind.In theoretical research.Therefore,based on the above-mentioned pricing theory research,the game of pricing effects and empirical analysis,this paper aims at the improvement of the indexed exercise price for the equity incentive plan that has been successfully implemented.The study finds that the single-index exercise price narrows the volatility to a certain extent and increases the Sharpe ratio,indicating that the indexed exercise price is beneficial to the incentive object to obtain relatively stable after removing the influence of systemic factors on the company's stock price.High incentive income.The double-index exercise price is better because it better eliminates the systemic risk in the stock price,so the volatility is smaller and the Sharpe ratio is larger.Indexed exercise prices can improve the performance of exercise prices that are too rigid and the phenomenon of exercise price and performance upside down.Even for the successful implementation of the equity incentive case,the use of indexed exercise price can improve the incentive effect,avoiding the manager to use the high transfer method to reduce the exercise price and obtain the improper income.Through the above research,this paper has the following main conclusions:(?)Under the condition of incomplete information,equity incentives can help to increase the level of efforts and risk-taking of incentive targets,help to improve the efficiency of incentive input,and provide the original kinetic energy of corporate incentive output and personal income improvement.Equity incentive programs have universal applicability.For companies with entrusted agency problems,it is wise to choose to implement equity incentives.(?).There is an optimal exercise price range for equity incentives,and there is an inverted “U”-type quadratic curve relationship between exercise price and company performance.The improper pricing of equity incentives has the possibility of inducing earnings management,and there is a positive correlation between the two.Equity incentive exercise price has a significant impact on the company's innovation output,but there is still room for improvement in the positive effect of innovation output at this stage.(?)Indexed exercise pricing can better eliminate systemic risks in the company's stock price.Compared with the traditional option pricing method of B-S,the incentive strength of the indexed option pricing method is lower when the same number of equity incentives are granted,but when the same amount of equity incentive is granted,the corresponding number of indexed options is higher than the number of traditional options.In general,the incentive strength of indexed option pricing is greater than the B-S pricing.(?)The correlation coefficient between the company's stock price and index,the market's risk-free interest rate,the instantaneous volatility of stocks and the continuous dividend rate affect the exercise price by affecting the systemic risk coefficient b and the company's growth ability ?,and the magnitude of the indexed exercise price is proportional to them.,b influence is greater than it ?.(?)The successful implementation of equity incentives also has room for improvement in exercise price.The smooth processing of the exercise price by exponential pricing effectively solves the problem that the exercise price of the fixed exercise price is too rigid.The improvement of the exercise price and the company's performance is reversed.The unilateral step of the incentive period is lowered,which helps the listed company to achieve incentives.A fair salary incentive target that matches the emphasis on regulation,revenue,and input.This paper starts from the issue of equity incentive exercise pricing,and innovates in several aspects: theoretical research,empirical analysis,indexed exercise price application and incentive effect measurement:(?)Focusing on the issue of equity incentive exercise pricing,it makes up for the onesidedness of measuring the intensity of incentives simply from the number of shares held.The intensity of equity incentives is determined by the combination of incentive quantity and exercise price.The analysis of incentive effect needs to start from the equity incentive contract itself.The exercise pricing is a key link directly related to the benefits of both parties.(?)The embedding equity incentives improve the principal-agent model.On the basis of the classic principal-agent model,the equity incentive amount ×(stock price-exercise price)is used to represent the equity incentive income in manager compensation.The treatment of the difference between bonuses helps to independently analyze the impact of the price of equity incentive exercise on the degree of effort and risk sharing of managers.(?)The exercise price difference ratio is constructed as the equity incentive exercise price index,and the impact of the equity incentive intensity on the company's performance,innovation ability and earnings management is empirically studied.Under the premise of satisfying the principle of sufficient information volume,the equity incentive intensity not only includes the number of equity incentives,but also increases the exercise price index representing the incentive intensity of the unit,enriching the research conclusions of the existing incentive effects.(?)Indexed exercise pricing not only conducts mathematical derivation and numerical simulation for pricing mechanism and incentive intensity,but also carries out case calculation and case analysis on the application of indexed exercise price in equity incentive practice,and exerts the guiding role of pricing theory on practice.