An Empirical Research On The Stock Option Encentives Of Listed Companies In China

Stock option plan is designed to make a shared goal for shareholders and management so as to stimulate the management to work on behalf of the shareholders and society to the fullest. Is it useful in China? What is the short-term impact on the public companies? What factors make a difference on the short-term impact and why do they work? The aim of the paper is to review the stock option plans in China and analyze its short-term impact after the publication of approach on stock option incentives of listed companies by China Securities Regulatory Commision.The paper is divided into four parts:In the first chapter, we introduce the background, theme, arrangement of the research, from which we can have a simple idea of the whole paper.In the second chapter, we have a literature review of stock option plans, which tell us the theoretical basis, its development and related empirical analysis results.In the third chapter, the environment and some details of stock option plans of Iisited companies are demonstrated. Then we apply the event study approach to the research of the short-term impact and related factors, using the sample of fifty seven public companies that announced their drafts during 2006 and 2007.We find out obvious positive responses of the stock prices to the pbulication of stock option drafts before and after the announcement, and information is disclosed before its due time, so the stock market in China has not achieved effectiveness. Futhermore, public companies who meet the conditions below have the best stock price performance: (1) adopting stock option rather than restrited shares as incentive form; (2) in the industries that have promising future; (3) small-size revenue scale; (4) controlled by non-stateowned enterprises; (5) high net income growth rate in the year before the announcement of the drafts.In the fourth chapter, we conclude and look into the possible further research.