Research On The Value Accounting And Incentive Effect Of Employee Stock Options

Employee stock options are an option that companies give their executives and core technical personnel to buy a certain amount of stock at a certain time in the future,and are intended to provide executives and core technical personnel with a long-term incentive to motivate employees to strive to increase the company’s value.Employee stock option,as an incentive mechanism,began in the United States in the 1970 s and grew rapidly and widely in the 1990 s.At present,China is in an important stage of the construction of modern economic system,listed companies as the "engine" of China’s economy,in the construction of modern economic system play a "head role".The construction of modern economic system can not be separated from the development of listed companies,employee stock option as the most popular incentive tool can undoubtedly better meet the needs of listed companies,to promote China’s modern economic system construction is of great significance.In this context,the value accounting and incentive effect analysis of employee stock option have been the focus of accounting,statistics and other related academic circles.System of National Accounts 2008(SNA2008)uses the fair value method to account for the value of employee stock option and treats it as employee compensation,in the light of the practice of the International Accounting Standards Board.System of National Accounts 2016 in China(CSNA2016),issued in August 2017,also includes employee stock option as employee compensation in the scope of National Accounts according to SNA2008.However,neither the IASB,SNA2008 nor CSNA2016 address the specific method of accounting for the fair value of employee stock option.Compared with the theory of employee stock option value accounting,the research method of employee stock option value accounting lags behind.Because of the complicated characteristics of employee stock option such as vesting period,employee departure and early exercise,there is no widely recognized accounting method of employee stock option at home and abroad.What kind of accounting method should be used to more closely account for the value of employee stock option? This requires further study to determine.Employee stock option is different from the traditional salary,such as salary and bonus,employee stock option for the company employees is a subjective value,employees can estimate the value of employee stock options in advance to expect future option income,thus affecting the incentive effect during the implementation of employee stock option.However,the existing portrayal of employee stock option incentive index is chaotic,or that the measurement standard of employee stock option incentive index is not clear,resulting in the different conclusions of employee stock option incentive effect research,the literatures really from the key characteristics of employee stock option to build the employee stock option incentive index are relatively rare.In view of the related problems in the research of employee stock option above,it is of great practical significance to study the value of employee stock options and to study the incentive effect on them in depth and systematically,which is of great practical significance to guide the improvement of the employee stock option incentive system in China.Based on this,this paper starts from the basic theory of employee stock option,combs the characteristics、recording principles、valuation method and the theoretical basis of incentive of employee stock option;and analyzes the development of employee stock options in China by the data published by Wind and the stock option incentive plans of listed companies;and according to the characteristics of employee stock option,this paper proposes an option pricing model suitable for Chinese employee stock option value accounting,estimating relevant parameters,further accounting for the value scale and structure of Chinese employee stock options from 2006 to 2018.Using the data of employee stock option value obtained from accounting,combined with the relevant data of Listed Companies in China,this paper empirically studies the incentive effect of employee stock options on the performance of listed companies from three different perspectives: the setting of employee stock option terms,the control of major shareholders and the life cycle of enterprises.Based on the above research results,some suggestions are given to improve the theory and method of employee stock option value accounting and optimize the incentive mechanism of employee stock option.Through the above research,the main conclusions are as follows:(1)This paper analyzes the implementation of the employee stock option incentive plans for China.China’s employee stock option incentive plans are generally growing rapidly,from 12 in 2006 to 166 in 2018.From the industry level,the enterprises which implementing the employee stock option incentive plan are mainly concentrated in the manufacturing,information transmission 、 software and information technology services and real estate industry,total accounting for 79.64% of the sample enterprises,the industry concentration characteristic is significant.From the depth of implementation of various industries,the number of enterprises that implementing employee stock option incentive plan accounts for a lower proportion of the total number of enterprises in their respective industries.According to the setting of the vesting period and maturity of the employee stock option in China,the average vesting period and maturity of the employee stock option are 2.17 and 4.28 years.(2)Based on the SNA2008 and the characteristics of employee stock option,the employee stock option value accounting method is proposed.Although SNA2008 and CSNA2016 include employee stock option in the national accounting range,no specific accounting methods have been published.Employee stock option,because of the characteristics of vesting period,employee departure and early exercise,are quite different from the standard stock option on the exchange,and the traditional stock option pricing model cannot be used to estimate the value of employee stock option.Based on the accounting paradigm of employee stock options in the SNA2008,the existing employee stock option accounting method is combed and the method suitable for the employee stock option value accounting of China is proposed-CWZ employee stock option pricing model.The traditional Black-Scholes and Binomial option pricing models fail to take into account the key characteristics of employee stock option,resulting in their estimates overestimating the value of employee stock option.CWZ employee stock option pricing model takes into account the complex characteristics of employee stock option,such as vesting period,employee turnover and early exercise,and its parameters are estimable,the results calculated by CWZ employee stock option pricing model can more closely reflect the value of employee stock option.(3)The total scale and distribution structure of employee stock option value in China from 2006 to 2018 are measured.The difficulty of using CWZ employee stock option pricing model to calculate the value of employee stock option lies in the estimation of model parameters.The data required for parameter estimation can be obtained through the announcement issued by the listed company and the data of Wind.On the basis of parameter estimation,the scale and distribution structure of ESO value in China from 2006 to 2018 are measured.The results show that,on the whole,the value of employee stock options in China shows a rapid growth trend.In 2006,the value of employee stock options was 61 million yuan,which increased to 3.908 billion yuan in 2018,with an average annual growth rate of 41.43%.In terms of industries,the concentration of employee stock option value is obvious.The proportion of employee stock option value in manufacturing,information transmission 、 software and information technology service and real estate industry is about 58.29%,13.65% and 10.91% respectively,accounting for 82.85% of the total.At the same time,the value of employee stock options based on Black Scholes is 36% higher than that of CWZ option pricing model;it is further estimated that the overestimation range of Black Scholes option pricing model is between 35% and 39%,in the case of Midea Group ’s fifth-phase stock option plan.(4)A multi-view incentive effect analysis is carried out on the value of employee stock options based on the calculation.Listed companies are in different environments,with different resource endowments and ability conditions,so the incentive effect of employee stock option is also different.That is to say,the incentive effect of employee stock option does not exist independently as a whole,which is affected by the setting of option terms,the ownership structure and the basic characteristics of the company.Based on this,this paper empirically tests the incentive effect of ESOs on corporate performance from three perspectives: microcosmic option term setting,medium large shareholder control and macroscopic corporate life cycle.The results show that: First of all,the incentive effect of ESOs in the "strict" sample group is significantly better than that in the "loose" sample group;further research shows that the incentive effect of ESOs in non-state-owned enterprises is better than that in state-owned enterprises.Secondly,the increase of the proportion of controlling shareholder restrains the incentive effect of employee stock option;compared with the state-owned enterprises,the stronger exploitation motivation of non-state-owned enterprises,but in the stateowned enterprises,this exploitation motivation is not obvious;compared with the hightech enterprises,the tunneling behavior of non-high-tech enterprises is stronger,but in the high-tech industry,this tunneling behavior is not obvious.Thirdly,in the growth and decline stage of enterprises,the implementation of ESOs can’t improve the performance of enterprises,and ESOs have a significant incentive effect on enterprises in the mature stage.(5)The corresponding policy suggestions are put forward.Combined with the results of the value accounting and the incentive effect of employee stock options,this paper gives some suggestions.According to the result of China’s employee stock option value accounting,two suggestions are put forward: firstly,improving the relevant standards of the fair value valuation technology and the information disclosure system of employee stock option,so as to improve the comparability and reliability of accounting results;secondly,China should establish the statistical statement of employee stock options to improve the basic work of employee stock option value accounting.According to the results of the incentive effect of employee stock options,three suggestions are put forward: firstly,to design appropriate incentive period and incentive conditions to ensure the incentive effectiveness of employee stock options;secondly,to strengthen the independence of the board of directors and the board of supervisors to improve their supervision and governance;thirdly,to deepen the reform of state-owned enterprises to improve the operating environment of employee stock options.