An Empirical Research On Equity Incentive And Corporate Performance

One important character of the modern company is the separation of ownershipand managerial authority, the ownership of shareholders means the shareholders canshare profits as dividends from the company while the managers control thedevelopment of the company, they play a determinate part in the long-termdevelopment of the company. According to the hypothesis of economic man, everyone ispursuing the maximum value of his own, the cost the managers pay to get the maximum utilityisn’t consistent with cost the owners pay, that can’t assure the consistency of their behavior. As theincrease of corporate performance and scale, though the managers don’t have the stock, they playan key role in the company’s development, it provides strong stimulation and motive. In thecompany, it’s usual the managers left the company because of the salary, so we need an effectiveway to solve this problem—providing shareholding for the managers, that will solve a lot ofproblems because of the consistency of their profit between owners and managers, the problemabout the supervising to the managers can be solved easily,because the development of thecompany determines the profit they will get.The purpose of the company is to stimulate the positivity of the mangers andother workers, to solve the problem and make the most profits eventually. As a keyproblem to solve the principal-agent theory, the topic about the equity incentive andcorporate performance isn’t only a problem that can be ignored, it even determineswhether the company can make a fast improvement, so it’s really necessary to studythe relationship of the managerial ownership and corporate performance, because itcan provides a theory about what a appropriate mechanism is and can understand howto motive the positivity of the managers and other people which provides thepossibility to make the company better.In the modern company, equity incentive is an important and efficientmechanism to plays an important and positive effect to stimulate the managers to dotheir best for the company. This dissertation select the unbalanced panel data of listedcompanies between2004and2010and studies the mutual relations between corporateperformance and equity incentive by using independent sample Test and HausmanTest, the empirical evidence shows as following when the owners of the companygives shareholding to the mangers as a way of incentive mechanism, it will encouragethe managers to do their best to work for the company and eventually promote theperformance of the company, as the corporate performance keeps growing,meanwhile, the owners of the company will give shareholding to the mangers again, then it willbring the mangers new passion and motivation. In short, the relations betweencorporate performance and equity incentive is obvious and stable, the promotion ofmanagerial ownership is positive to the performance of the company，it mainly showsthe convergence of interest effects between them.