An Inquiry Into The Managerial Ownership Incentive Mechanism

To stimulate the executives in highly dispersed corporations work scrupulously and conscientiously, managerial ownership incentive mechanism has been widely acknowledged and implemented in western developed market economies since the last half of 20th century. Domestically, with the exploration of various means to actualize communism, ownership incentive mechanism, such as stock options, managerial ownership and so on, is being or will be introduced to the process of state-owned enterprises reform.Even if a number of theoretical and empirical accomplishments concerning managerial ownership have been achieved through the study of scholars around the world, it is still in fierce argument that what it brings to us in real corporate operation. In China, particularly, under the background of economic transition and with various unique and inherited issues, it is worthy thorough analysis that whether we should carry out this mechanism universally in state-owned enterprises.Specifically, starting with the uncertain environment faced by corporations, this thesis comprehensively takes market competition and individual risk preference into account. By applying the theory of decision-making under uncertainty, it constructs the traditional fixed-salary model and newly introduced performance-based income model subsequently, and draws the conclusion that it is market competition, but not ownership structure, matters in the determination of the effectiveness of managerial ownership incentive mechanism, i.e. managerial ownership works in highly competitive markets but does not in monopolistic environment.Furthermore, by drawing samples randomly at the basis of industrial separation and applying basic econometric regression method, this paper verifies that, to a certain extent, the previous theoretical hypothesis is illustrated by real corporate operation behaviors in domestic capital markets.Consequently, this essay suggests that it is imperative to introduce market competition in the process of ownership restructure, and that the competition should come from product markets, capital markets and professional-manager markets, etc, simultaneously.