Empirical Study On The Effect Of The Equity Incentives:Based On The Enterprise Life Cycle Theory

In order to solve the principal-agent problems due to the separation of ownership and managerial authority, equity incentive system arises. The identity of the managers changed from the agent to the owner by being given a certain number of stock, so they will work hard to improve the company’s long-term value from the perspective of shareholders and that will effectively reduce the agency cost, improving corporate performance. Equity incentive first arose in the United States, followed by France, Italy and other countries, though the practice of equity incentive in western countries has been around for years, however specific effect of the implementation is a big controversy. Equity incentive starts late in our country, the completion of non-tradable shares’ reform in 2005 eliminate the institutional obstacles to carry out the equity incentive, then equity incentive come into being, the revision of the company law and securities law has laid a legal foundation for the implementation of equity incentive. All kinds of exploration also started in the theoretical and practical areas from now on, but the effect of the western “import” in our country has yet to be test.In the related literature on the study of the effect of equity incentive, most of them regard the enterprise as static to study the relationship between the equity incentive and corporate performance, but in reality, companies as well as other species has its own life cycle, the company at different stages of life cycle has different characteristics, thus the effect of equity incentive’s implementation will be affected. So this article creatively introduce the enterprise life cycle theory to dynamic study the equity incentive’s effect at different stages.The article choose 532 listed company as samples which have carried out equity incentive from 2008 to 2013, it includes three empirical studies:(1)Equity incentive’s impact on company performance;(2)Enterprise life cycle’s impact on the effect of equity incentive;(3)The relation of company performance and the equity incentive mode at different life cycle stages. The empirical results show that the implementation of equity incentive promoted the enterprise’s performance to a certain extent, and enterprise adopt equity incentive in the life cycle of maturity is superior to the growth stage, different life cycle stages should choose suitable incentive mode, stock option is an appropriate model in growth stage, the restricted stock fits the mature stage. On the basis of the relevant conclusions, this article analyze the causes of the results of the study, and put forward corresponding suggestions:(1)Optimize the equity incentive plan combined with the feature of their own stage of development;(2) Design reasonable performance indicators;(3) Perfecting the corporate governance and supervision system;(4)Establish a standardized capital markets. The related suggestions will be hoped to be helpful to the implementation of equity incentive in the future.The innovation of this paper is the introduction of enterprise life cycle, and the division of life cycle stage for the listed companies by reference to Dickinson’s cash flow method, and empirically studied the equity incentive effect of listed companies in different life cycle stages. The empirical model introduced the dross variables of enterprise life cycle and the intensity of equity incentive to verify that the enterprise life cycle’s impact on equity incentive, and hoping that this will provide feasible suggestions for listed companies at different life cycle stages.