Study On The Effectiveness Of Stock Option Incentive For Listed Companies In China

The purpose of Incentive Stock Options is to solve the problem which isgenerated by the separation of management rights and administration authority. Inthe modern enterprise, the Incentive Stock Options, which engendered in Westerncountries firstly, has played a useful effect in improving corporate performance.Incentive Stock Options, which was introduced in the1990s in china, has goneinto a new stage after Share Segregation Reform in2006. However, as capitalmarket has a distempered development in china, the effect of Incentive StockOptions remains to be verified.Firstly, by the analysis of theoretical foundation in the meaning, as well as thereview of the domestic and foreign research literature, the positive and negativeeffects have been analyzed theoretically for the Incentive Stock Options. Secondly,based on what has been discussed above, the development of Incentive StockOptions in china and the US is analyzed. Through comparison, the revelation ofthe US on china, as well as the future direction of development, are studied.Finally, by the data of the listed companies, the effectiveness of the IncentiveStock Options is empirically researched, which includes descriptive and statisticalanalysis, multiple regression analysis, SUR, Principal component analysis, and soon. Put the market factors, macroeconomic factors into the model creatively, andconstruct the "incentive" and "comparative no management incentive" two Groupsto analyze the effect of the incentive.The results are as follows. First, in the same industry, the implementation ofoption incentive business, its operating efficiency is better than not implementedincentive company. Second, the incentive intensity, which is integrated by theprice factors, exist significantly positive correlation with Enterprise Performance.However, the pure ratio of equity incentive has no significant correlation with andperformance. That is to say, incentive effect not only exist relationship to theincentive intensity ratio, but also is affected by the stock price, the exercise priceand the percentage of cash remuneration in the revenues. Third, the firm size, themarketization index and asset-liability ratio pass the test of significance. Fourth,Growth opportunity and the scale of companies positively correlated withIncentive sensitivity, the incentive effect of private enterprise is better thanstate-owned enterprises. Fifth, in industry analysis, the incentive effect in ITindustry is better than in the Manufacturing. Sixth, in the case of theimplementation of the management incentive, the incentive sensitivity issignificantly affected by rising and falling of share price returns, which means that there is a positive correlation between the incentive sensitivity and stock returns.In the case of non-management incentives, the increase of equity returns has littlepromotion of incentive sensitivity. However, the decline has no much impact. Thus,the implementation of management incentives plays a significant role in theimprovement of performance sensitivity. Finally, according to what has beendiscussed above, Opinions and views are put forward on how to develop themechanism of Incentive Stock Options more effectively.