Research On Equity Incentive And Inefficient Investment Of Chinese Listed Companies

Under modern enterprise system,as a result of the existence of agency problems,which mayhave a certain effect on the investment behavior of company management,leading to make someinefficient investment for some motivation.And equity incentive mechanism can solve theproblem effectively.The introduction of equity incentive mechanism to listed companies willaffect the investment decisions of senior executives, and investment decisions greatly influencethe company’s growth and the growth of the company’s future cash flow,which will affect thecompany’s operating risk, profitability, etc.Therefore, it have important practical significanceundoubtedly to research the relationship between the listed company equity incentive andinvestment.Based on the related theory of equity incentive and the efficiency of investment theory,the text mainly focus on research the relationship between equity incentive and the investmentefficiency, which from the Angle of equity incentive implementation stage heterogeneous. Thetext analyses the investment behavior and motivation of executives among different phases ofthe equity incentive.and then discusses whether companies can effectively restrain the investmentefficiencyand standardizeenterpriseinvestmentbehavior.Firstly, the text presents a literature review about the equity incentive effect, the causes ofinefficiency investment and the relationship between them.Secondly,we have an analysis ondifferent stages of equity incentive,which can influence the behavior on excessive investment orinadequate investment.Then we put forward the research hypothesis.Through selecting listedcompanies which implement of equity incentive in our country during2006-2012as the researchsample,the text examined the relationship between equity incentive and inefficiencyinvestment,then further discussed the relationship between the equity incentive and someinefficientinvestmentbehavior.Themain researchconclusionis as follows:(1)Among the listed company of equity incentive,in line weight limit period, companymanagement have more inclined to make excessive investment behavior.Equity incentive has apositive correlation with excessive investment during the line weight limit period of listed companies.The higher the level of equity incentive, the stronger the degree of excessiveinvestment behavior.Mainly because of after the equity incentive plan, based on some kind ofmotivation,the company management will change their business and investment behavior, expandthe scale of the company’s existing investment,and tending to high-yield and high-risk investmentprojects, trying to get the company’s operating efficiency, performance, leading to themanagementmakesomeexcessiveinvestmentbehavior.(2)During the right choice period, listed companies which implement equity incentive willoccur the phenomenon of excessive investment.During the line right choice period, based on theinfluence of the equity incentive motivation, the company managers will adopt positive measuresto enhance the value of the enterprise, in order to realize the maximization of individual interests,and in order to better exercise, enterprise managers will take measures to expand the investmentscale of the enterprise, continue to invest in higher-yield and higher-risk projects, leading to theexcessiveinvestmentfinally.(3)During lock-up period, the enterprises which implement equity incentive are moreinclined to have inadequate investment behavior.in the lock-up period, company managementhave achieved the purpose of the stake, the motivation of management is no longer to achieve theexercise condition and promote the company’s performance, the influence of various constraintconditions inside and outside, the management may reduce the investment scale of the enterprise,and even give up project which net present value is greater than zero, resulting in the phenomenonoflack ofinvestment.