China's Listed Companies, Management Equity Incentive Empirical Research

First, using new measure of managerial equity incentives, we analyze again the relationship between the equity incentives and the performance of the firms. Contrary to the results of domestic former research, our conclusion is: although the correlative coefficient is low, the equity incentives virtually have positive impact on the performance statistically. This suggests that we have already made rapid progress in managerial equity incentives, and at the same time we should further improve it. Second, there are two aspects in the research of the managerial equity incentives: one is the relationship between the equity incentives and the performance of the firms; the other is what the determinants of the equity incentives are and how they determine the equity incentive level. The domestic research papers analyze the former at length but overlook the latter. We therefore manage a empirical study from the point of the latter-that is , the determinants of the equity incentives-with data from the firms of the Chinese stock markets. Our conclusion is that contrary to the foreign economists' research, only the relationship between the equity incentive level and the growth opportunity is consistent with the optimal level proposed by foreign economists. However the relationship with other determinants-firm size, firm risk, free cash flow and managerial tenure-has nothing to do with the optimal level and is even just contrary to it. We commend that the problem is caused by "internalition of outsiders" proposed by Huang(2004)...