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On The Equity-based Incentive Mechanisms For The Listed Companies In China

Posted on:2010-10-22Degree:MasterType:Thesis
Country:ChinaCandidate:C J PanFull Text:PDF
GTID:2189360275993748Subject:World economy
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The principal - agent problem has been puzzling the owners of the enterprises since the establishment of the modern enterprise model and the detachment of the responsibilities of the owners and the operators, which is one of the main factors of the problems of the management and its low efficiency. As to the listed companies in China, this problem becomes more serious due to the obscure property right in the planned economy and the old problems concerning the disorder of the corporate management since the transformation of state-owned enterprises. The successful solution by the incentive mechanism in the enterprises in developed countries prompts the corresponding administrative departments of the government and the listed companies to pay attention to the incentive mechanism which has been long neglected before. And a series of the laws and regulations has been set down since the year of 2006 which serves as a prelude to the promotion of the stock-based incentive in China. Accordingly, this essay focuses on the proper incentive mechanism for the listed companies in China, which is surely significant for the undergoing incentive planning and operation.This paper begins with the mathematical models for the effectiveness and necessity of the incentive mechanism used in the precluding the recessive moral risks in terms of the principal - agent problems, makes a comprehensive systematic categorization of the incentive models, and arrives at the conclusion that the incentive mechanism of the executive stock option is the most suitable through the analysis of the characteristics and adaptation of all kinds of incentive models. Therefore, this research compares the corresponding surroundings for the systems before and after the promulgation of "Provisional Measures on the Equity Incentive in the Chinese Listed Company" on January 1st, 2006, and claims that the announcement, modification and perfection of the series of the laws and regulations after the year of 2006 have paved the way for the implementation of the incentive mechanism. To investigate the concrete operation of the mechanism in the listed companies in China, this paper makes the positive analysis on the sample companies: it turned out a positive correlation between the incentive mechanism of executive stock option and the business performance through the establishment of the regression model of the business performance and incentive intensity of the listed companies with the corresponding analysis by means of EViews, which indicates the real incentive effects of the executive stock option on the business performance of the companies. However, the descriptive statistical analysis on the business performance and the stock return shows the weak efficiency of the capital market in China. With the focus on the weak efficiency the capital market and the defects of the incentive mechanism of executive stock option, this essay offers some suggestion that the listed companies adopt the evaluation system of the comprehensive performance as the incentive model for the indexed executive stock option and simulates the concrete case to prove its superiority as well as its applicability. Finally, this paper puts forward some advice on the deficiency of the construction of the outside environment.Accordingly, the essay is laid out just as follows:Chapter One is introduction, which is about the research background, the achievements of the researchers, the aim, significance as well as the research methods of this study and its innovation, together with the some definitions concerning the incentive mechanism.Chapter Two sets the theoretical foundation for the incentive mechanism, that is, agent theory and manpower capital theory. The former illustrates the necessity of the incentive mechanism from the perspective of the precluding the recessive moral risks in terms of the principal - agent problems, while the latter argues for the vital role of the incentive mechanism in the manpower capital operation.The third chapter is concerned about the kinds of the incentive mechanism, offers the comprehensive categorization of the mechanism, and arrives at the conclusion that the incentive mechanism of the executive stock option is the most suitable through the analysis of the characteristics and adaptation of all kinds of incentive models.The fourth part investigates the construction of the corresponding systems. The analysis results show that the announcement, modification and perfection of the series of the laws and regulations after the year of 2006 have paved the way in terms of stock sources, option income approaches, corporate management and accounting treatment.Chapter Five makes the positive analysis on the incentive mechanism of executive stock option, the business performance and stock price reflection, which indicates the real incentive effects of the executive stock option on the business performance of the companies with the weak efficiency of the capital market in China.Chapter Six offers some suggestion that the listed companies adopt the evaluation system of the comprehensive performance as the incentive model for the indexed executive stock option in order to avoid the defects of the market and the incentive mechanism of the executive stock optionChapter Seven further puts forward some advice on system construction of the capital market, the supporting manager market, reputation mechanism construction and tax preferences.The last chapter is conclusion which summarizes the essay and looks forward to the future research.
Keywords/Search Tags:Principal-agent, Incentive Mechanism, Executive Stock Option, Business Performance, Stock Price Reaction
PDF Full Text Request
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