Study On The Correlation Between Equity Incentive And Corporate Performance Of The Listed Companies

In recent years, along with economic development, enterprise reform, China’s equity incentive policies and provisions improve gradually. Many listed companies began to try equity incentives to motivate and constraint senior management, to improve corporate governance structure and promote enterprise value maximization. In this environment, the study of the correlation between the incentives and corporate performance is necessary. In this paper, an empirical study examines the relationship between equity incentives and corporate performance of listed companies in China, and analyzes the implementation effect of different excitation modes. It is important for improving the equity incentive related theories and enhancing the incentive effectiveness of listed companies.Firstly, this paptr summarizes and assesses the domestic and foreign classic literature of the correlation between equity incentives and corporate performance, elaborates the related concepts and theoretical basis, introduces and compares a variety of equity incentive model, analyzes the status quo of China’s implementation about equity incentive such as the number of companies, industries, incentive modes and incentive proportion. After that, this article chooses the listed companies which announced the implementation of equity incentive plan firstly in2011as the sample, selects the listed companies which have the same scale, the same industry, capital structure but did not implement equity incentive plans as the comparison sample, uses the independent samples T-test method to examine them and finds that:before the sample companies announced their plans, the firm’s return on net assets and earnings per share do not exist significant differences compared with the comparison sample companies, indicating that corporate performance being good or bad does not affect the implementation of equity incentive plans.Based on this premise, we studies on the listed firms implementing equity incentive in2010by using paired samples T-test and regression analysis and find that the implementation of equity incentive is conducive to the optimization of the company performance. After implementing the equity incentive plan, the company’s returns on net assets have increased but not obvious, earnings per share have been significantly improved and have non-linear correlation with the proportion of equity incentives, with a range of effects. Further studies on the relationship of earnings per share and equity incentive show that the convergence effecu of interest on the company performance is biggest when the incentive ratio is between3%-6%. Studying on the listed firms in this interval, we find that in the different modes of incentive, the incentive effect of restricted stock is best.At last, this paper puts forward relevant recommendations to solve the existing problems on equity incentive of China’s listed companies, we suggest that listed companies should select appropriate equity incentive model according to their own circumstances, try a variety of incentive model based on promoting restricted stock incentive, and establish scientific performance appraisal system, increase the weight of non-financial indicators and comprehensive indicators, establish a good institutional environment, introduce audit and other external intermediaries to monitor the company operating level, value and encourage stakeholders to participate in corporate governance, in order to improve the corporate governance structure constantly, improve equity incentives mechanism, enhance incentive effectiveness and maximize the incentive effects.