The Relation Between The Equity Incentives And The Inefficient Investment

Investment is one of the important business activities, which is related to enterprise growth. Whether the enterprise can obtain the good operating performance is affected by the investment efficiency. Equity incentive plan originated in the west in the end of twentieth is an incentive and restraint mechanism, which links the performance of managers with the managers’ shares, when managers performance reaches a certain level, enterprise performance can be promoted by giving corresponding rights to the managers, and promoting the consistent interests objective of the management and shareholder. Most of the existing researches show that equity incentive level has a negative influence on non efficiency of investment, specifically, the higher equity incentive level can alleviate the shortage of investment and restrain excessive investment. But these researches studied the relationship from the traditional exogenous perspective, without considering the effect of the following two factors:firstly, it failed to eliminate the possibility of equity incentive and non efficiency of investment; secondly, the equity incentive policy on executive is a long-term and continuous plan, the presentation of the effects of it need a long time, its role may not manifest in the short term. Therefore, the results of such studies are not accurate.Through the above brief analysis, this paper divides the non-efficiency investment into two parts, over-investment and under-investment, considering the endogeneity between equity incentive and non efficiency of investment and the inter-temporal influences in different accounting period, namely dynamic endogeneity, taking shares of listing corporation in 2008-2013 years which implemented equity incentive as the research object to have further research on the relationship. The results of the study show that, considering the dynamic endogeneity effect, the equity incentive enhances over-investment, alleviates the under-investment shortage as well as the effect is significant. In the view of dynamic endogeneity effect, the non-efficient investment including over-investment and under-investment has negative and significant effects on equity incentive. The early equity incentive has significant effects on current over-investment and under-investment. The early over-investment and under-investment have significant intertemporal feedback effects on current equity incentives levels...