A Studay On The Effects Of Stock Options Of Gem Companies

Stock Options existed in the West for nearly 60 years of history, it has been proved that it is an effective way to solve principal-agent problem between the shareholders and managers of listed companies. In China, However, a more standard development hasn’t begun until late 2005, the Commission published "The norm of equity incentive of List companies." This norm started to be implemented in 2006, allowing listed companies that have complete the reformation of equity distribution to implement stock options mechanism. The environment in which this mechanism is enforced, the capital markets and the more standard norms further improve the development of stock options. Yet the economy of China is still in its infancy stages, would this advanced equity incentive mechanism still works the same in China as it does in foreign countries, considering there are such great difference between them?Therefore, under such circumstances, it has very important significance to explore the effects of GEM mechanism. Since October 23, 2009, A-share market GEM Board in A-Market started to function, October 2010 there were up to 120 companies listed on GEM till October 2010. It isn’t uncommon that stock options has been used in the GEM, still there are differences compared to main board and small plates when it comes to this. Meanwhile, the A-share market is still new to the GEM, the scale of academic research has not yet formed, and as for the GEM’s stock options problem, there is rare study. This article firstly discussed the characteristics of GEM and the advantages and disadvantages of GEM compared to Main Board. Then we concluded that the GEM stock options effect is not that obvious as we expect after the GEM stock options empirical test. At the end of this paper, we try to name some relative advices to deal with the problems above. The significance of this research is to deeply understand the essence of the GEM stock options and try to improve the GEM stock options system in order to let stock options fulfill its potential, and make it work its best ability.