Analysis Of The Implementation Of Managers' Equity Incentive Based On The Enterprise Life Cycle

Managers' equity incentive is an important way of long-term incentive mechanisms, it is considered to be an effective mechanism to solve principal-agent problem. Generally believed that managerial ownership helps to improve the performance of enterprises, in fact, implementation of managerial ownership is not always to be able to improve corporate performance. As listed companies in the specific enterprise life cycle which impacted by theirs characteristics of the business strategy and financial aspects, some of the implementation of the managers' equity incentive did not achieve the desired results, and some even played a negative role.On such a consideration, this paper analyzed the effects of implementing the managers' equity incentive based on the enterprise life cycle, through the way of theory studies, case studies and empirical research. First sorted out the basic theory of the managers'equity incentive and the enterprise life cycle theory, cleared and defined the stages and the features of the enterprise life cycle, then adopted the quantitative financial method which based on firm size, divided stages of enterprise life cycle of listed companies which implemented the managers'equity incentive, by analyzing and comparing the effects of using the managers' equity incentive between the developing Guangdong Baolihua New Energy Stock Co.,ltd and the developed Beijing SL Pharmaceutical Co.,Ltd, further elaborated the relationship and interaction between enterprise life cycle and implementing the manager' equity incentive. Then, selected 40 samples of listed companies which applying the managers'incentive stock options started in 2006 at a particular stage of enterprise life cycle, analyzed the effects of adopting the managers'equity incentive between 2005-2009, which concluded:(1)Listed companies at developing stage and developed stage all suit for implementing the managers'equity incentive, but the performance of the developing companies using the managers'equity incentive better than those of the developed companies'. (2)the main motivating factor of implementing the managers'equity incentive in different stages of the life cycle are not the same, that of the developing stage is revenue growth, while that of the developed stage is research and innovation. Same time, companies can design the elements of the managers' equity incentive program, such as the incentive object, the exercise price, grant size, performance indicators and exercise arrangements, to encourage the incentive object work for the company better and faster groth in a targeted and effective way. (3)Improving the management equity incentive stake will be more effective impel the management continue to improve internal governance, expand the main business revenue, enhance research and inject new power and vitality into companies which are at a particular enterprise life cycle.