The Study On The Relationship Between The Equity Incentive Plan And Investment Behavior Of The Company

Investment is not only the main force of the development of the listed company, but also is the basis of the value-added of future. It will affect the decisions of the finance and policy of the cash dividends at micro level, and the running situation of the entire economy of our country at macro level. The high-speed of the development of our economy in last decade is inseparable of the rapid growth of the investment, which at the same time brought the imbalance development between different industry. Traditional industry show the situation of over-investment which is excess of producing capacity and waste of resources. On the contrary, environmental protection and high-tech industry show the situation of under-investment which is low proportion of investment of R&D. With the increasing scarcity of resources, the efficiency of investment is becoming the focus of widespread concern. As the major participant in the market, how the company preventing non-efficient investment and improving corporate value in order to promote better and faster development of economy as a whole is a urgent problem to solve. Equity incentive provides an effective way to solve this problem.It bundles the interests of company and management together and promote the rational use of limited resource so as to improve the efficiency of investment.This paper reference the relevant study of home and abroad, against the non-efficient behavior of listed company, take the equity incentive plan as the entry point, based on the principal-agent theory> human-capital theory and two-factor motivation theory, and derivate the function mechanism of the equity incentive plan influencing the over-investment and under-investment. By building the empirical model of equity incentive plan and over-investment and under-investment, and selecting the panel data of china’s listed companies from A shares from2006to2011to test and verify the model. As a result, the theoretical and empirical study can confirm each other. After theoretical and empirical research, this paper find that there exist non-efficient investment generally during our listed companies, including over-investment and lacking of investment. Moreover, the situation for state-controlled companies is more serious than the private companies. Then we get the conclusion that equity incentive plan helps to reduce the non-efficient investment behavior of listed companies. Compared with the non-equity incentive companies, the company launched the equity incentive plan inhibit excessive investment behavior, but also alleviate the under-investment behavior. Overall, our equity incentive can effectively alleviate the conflict of interests between shareholders and management and can indirectly reduce agency costs by reducing the company’s non-efficient investment behavior. Finally, this paper put forward the relevant policy recommendations against the conclusions, point out the limitations of this article and the outlook of follow-up study. This study provide evidence for rationality of the equity incentive and a useful policy reference for regulators to strengthen corporate regulation.