Empirical Study Equity Incentive And Corporate Performance

As a long-term incentive mechanism, equity incentive mechanism aims to decrease the agency cost, promote the profit and enhance economic values of listed companies. In this paper, the relationship between equity incentive mechanism for top-management and the performance of Listed Companies were investigated by the empirical research method.Based on the reviewing of the state-of art knowledge of equity incentive mechanism and the practice of this mechanism in our country, the validity of equity incentive mechanism for corporate performance was studied by co-relation analysis of ROE (i.e. Rate of Return on Common equityholders’Equity) and equity incentive ratio of39companies until2010, which are listed companies with equity incentive mechanism in Shanghai and Shenzhen stock markets. It is found that there is a positive co-relation between ROE and equity incentive ratio of listed companies, and generally, equity incentive mechanism plays its deserved long-term incentive role. It is also found that the effectiveness of equity incentive mechanism in state-owned listed companies is better than that in non-state-owned ones.According to the results, some suggestions for promoting the effectiveness of equity incentive mechanism in list companies are also proposed in this paper, such as standardizing and perfecting capital market, detailing and standardizing equity incentive mechanism, establishing the professional executives market, setting up scientific assessment system for professional executives, perfecting the governance structure of listed companies and perfecting legal issues of equity incentive mechanism. These suggestions will be beneficial to the practice of equity incentive mechanism in listed companies of China.