Event Study On Stock Price Effect Of Equity Incentive

As a long-term incentive System, equity incentive designed to address the problem of the principal-agent relationship based on the separation of corporate management and ownership. Theoretical analysis and empirical research shows that equity incentive can actively promote the operating performance, enterprise value and shareholder's wealth of listed companies.The regulated equity incentive plan of Chinese listed companies is after the split share structure reform. "Measures for the Administration of Equity Incentive of Listed Companies" promulgated by the CSRC in January 2006, opened a great age of equity incentive plans of Chinese listed companies. Since then, equity incentives have a continuous improvement, and equity incentive plans of listed companies continue to emerge. Statistics show that, more than 150 listed companies had announced the equity incentive plans as the first half of 2010. This provides the sample data for the empirical research on equity incentive. From the practical point of view, the thesis mainly researches the short-term wealth effect of shareholders (or stock price effect) caused by announcement of equity incentive plans.This article is divided into six chapters. The first chapter describes the research background, research methodology, literature review and research innovations and limitations. The second chapter introduces the theoretical basis, transmission mechanism, and the main mode of equity incentives. The third chapter analyzes the equity incentive practices of listed companies in China, including the development process, and current situation of the implementation. The fourth chapter is the focus of this article, first introduces the efficient market hypothesis and the event study method, and then makes empirical research on stock price effect of equity incentive of Chinese listed companies. The fifth chapter is a specific case study on a listed company's equity incentive. Finally, ChapterⅥof this paper makes a summary of research findings, and puts forward policy recommendations to improve equity incentive and market efficiency.In this paper, empirical research on equity incentive program announcement illustrates the short-term effect on stock price, using the event study method, selecting abnormal return as the marker, selecting 128 listed companies during 1 January 2006 to 30 June 2010 as samples. First, the paper researches the listed companies overall of implementing equity incentives, and on this basis, researches the different groups in accordance with the incentive model, the company nature, the proportion of incentive shares, bull/bear market. The results show that obvious positive price effect is existed in Chinese listed companies of implementing equity incentives before and after the event announcement, the information disclosure of equity incentive causes the increase in shareholder's wealth. Meanwhile, there are event leak cases, which reflect that China's securities market has yet not to reach semi-strong form efficiency, and the information disclosure of listed companies is still a problem.Empirical research on equity incentive of listed companies in the different groups finds that, equity incentive of private enterprise than that of state-owned has a higher stock price effect; stock option model than the restricted stock model causes larger price effect. In addition, the stock price effect of the companies which the proportion of incentive shares accounting the total shares is less than 5% is a little bit stronger than that of more than 5%; the stock price effect of the companies of implementing equity incentive in a bull market year is no greater than in a bear market year. This article on the conclusions, to a certain extent, helps investors understand the stock market reaction to the equity incentive plan and provide a reference for investment decisions.