The Research Of Effectiveness And Influencing Factors Of Kangde Xin’s Equity Incentive

The separation of modern enterprise’s ownership and management rights triggers agency conflicts between managers and owners in the company’s business decisions. In the west, equity incentive is considered to be a tool which is able to weaken the agency costs, making managers and owners’goals converge. After drawing lessons from foreign experience, many companies in our country also adopt stock options as a way to incentive and reward employees especially mangers of the company. However, many domestic empirical studies indicate that many of the listed companies’ equity incentive in China did not achieve the desired effect. The reason for this is that the interests of the equity incentive plan is designed to be a disguised form, or become a tool for big shareholders and managements conspiring and hollowing out listed companies. Therefore, so far there are three different hypothesis in regard to equity incentive effect on the performance of listed companies:Incentives hypothesis、welfare management hypothesis and "Empty" hypothesis. To the end, what’s the result of the effect of equity incentive plan in the listed companies? Is it accord with incentives hypothesis, or management benefits or hollowed hypothesis? In which governance environment can equity incentive scheme obtain good incentive effect in the listed companies? Researches to these questions are of great significance both to evaluate the effectiveness of the equity incentive schemes and for the listed company stockholders’ decision making.Kangde Xin is listed in2010high-tech private listed company. since2011, it has lauched three consecutive equity incentive plans for corporate executives and technicians which caused widely attention. This article uses Kangde Xin’s stock option incentive scheme as the research object to evaluate the effect of equity incentive plan.From the aspects of major shareholders, the board of directors and auditors, we studied the factors that influence the effectiveness of the company’s equity incentive plan.In this paper, through case study we conclude that:Kangde Xin’s equity incentive plan in general accords with incentives hypothesis. It implements effective incentives to executives and the core technology personnel. The corporate’s financial performance significantly increased, the equity incentive plan has also been widely accepted by well-known institutional investors. All in all, it has caused good market response. Kangde Xin has technology research and development background, its large shareholders have stake in share ideas and can implement stability control. All of these factors play decisive role on the effectiveness of the equity incentive plan. Besides, its scale, knowledge structure and ability structure of the board of directors and auditor reputation also play important roles in the effectiveness of Kangde Xin’s equity incentive schemes.This paper provides reference and reference to design effective equity incentive plan and to create a good environment for the equity incentive plan among private listed companies; it can also provide meaningful reference for stakeholders to judge the validity of the equity incentive plan.