Incentive Effects Of Stock Option Awards Of Listed Companies In China-an Empirical Investigation

The stock option incentive plans of companies in China dates back to1990s, however, there's no regulated development until the formulation of"Listed Companies Stock Option Incentive Guidelines". The scholars of China who studied the effect of the implementation of executive stock incentives mainly focused on the accounting performance, and there are still different opinions on this subject.This paper will give a systematic analysis on the current situation of stock option scheme in China. The paper will do some deeper research into the effects of stock option incentive based on the data of A-share listed companies which includes three aspects: agency costs, profitability and growth, market reaction. The empirical study of this paper is divided into two parts: the first part analyzes the effects of stock option awards on agency costs, profitability and growth of listed companies and this part uses regression analysis study. The second part is the market reaction to stock option awards plans, and this part adopts event study.The results of empirical study suggest that: stock option incentive plans can not reduce agency costs, promote the growth, however, companies tend to have better performance after stock option incentive. In the area of market effects, stock option incentive plans can generate abnormal return. Moreover, the market has significant positive effect before the announcement. It indicates that the information is leaked in advance. However, after calculation, we find that the insider trading in stock option incentive plans of China has been very little. This article classifies the stock option incentive plans by the underlying assets. We find that compared to the subject of stock and stock appreciation rights, the subject of option for stock option incentive plans generates more significant abnormal return, which indicating that the market is more upbeat about options for the subject matter of the incentive scheme. Based on the results of empirical analysis, this paper reaches the conclusions and analyzes the problems in stock option awards plans and then proposes some countermeasures and proposals.This paper includes six chapters: chapter one is introduction, chapter two summarizes the relevant literatures at home and abroad, chapter three is a summary of the current situation of stock option incentive in China, chapter four analyzes the effects of stock option incentive on agency costs, profitability and growth of listed companies, chapter five is the market reaction to stock option plans, and the last chapter concludes the paper and gives some suggestions.