The Study Of Impacting On Over-investment Of Listed Companies From Equity Incentive

The emergency of the over-investment came with the rapidly development ofeconomic. Enterprises as the main body of investment, the efficiency of theirinvestment are the core of corporate governance. Investment behavior directly affectsthe development of the company’s direction and future cash flow growth rate evenenterprise value.Equity incentive as a method of restricting excessive investment has beenrecognized in the law. at the end of2005.The number of implementation of equityincentive company from the initial43to114by the end of2011. It must also be notedthat the equity incentive just be implemented. Equity incentive system and thecompany’s ownership structure and enterprise system is still in the matching. Equityincentive system is good to our listed companies? How to build our own equityincentive? These questions are the core content of equity incentive system studied bydomestic scholars.Forcing on the study of impacting on over-investment of listed companies fromequity incentive, this paper introduces shareholder control over equity incentivecombined with the status quo of listed companies’ shareholding structure andincentive stock options based on basis of the equity incentive theory and excessiveinvestment drive theory and with the theoretical analysis of the assumptions. Thispaper choose Richardson (2006) expected investment model to be the identification ofover-investment in Part of empirical test.It selected the listed companies from2006to2011as the initial study sample and data analysis statistics panel. The residuals of theequation represents the actual investment the difference between the amount ofexpected investment, residual positive as compared to over-investment which canfilter out the data of over-investment. Second, in the part of anglicizing the impactingon over-investment from equity incentive, the paper is tested by equity incentiveendogenously. After determined without of endogenous of equity incentive, thepaper tested that there is no significant impact on over-investment from the equityincentive directly. This paper shows that equity incentive significantly impacts onover-investment by introduced the Innovation of this point: the concept of conflictsfrom shareholder control over equity incentive. Third,this paper selects four thearticle shareholders holding pattern, the nature of equity, equity balance of the degree and a company’s growth as four indication to see how to affect the conflicts ofshareholder control over equity incentive and effect of the impacting onover-investment from equity incentive.Main conclusion of this article is shown as below:①Equity Incentivesignificantly impact on over-investment;②there is existed the conflict fromshareholders’ control rights to equity incentive exists;③The conflict is not existedwhen the shareholder in the company has absolute controlling right control, Theconflict is existed when the shareholder in the company has relative controllingright control so as to impact the effect of incentive;④The ultimate holding companyof shareholder control has the conflict with the equity incentive;⑤The ownershipbalancing the degree in the company restrains the conflict (non-significant);⑥The higher of growth speed of the company, the higher of the conflicts from theshareholder control over equity incentive.