Research On Equity Incentive And Opportunistic Behavior

The principal-agent problem caused by the separation of enterprise ownership and management right becomes the core of the problem of Modern Corporation governance. How to implement effective incentive and restraint mechanism to urge managers acting as the principle of the maximization of the shareholders’ interests? The principal-agent theory and the optimal contract theory consider that the incentive of the equity incentive to the managers can solve the problem of the agency between the shareholders and the manager, and balance the conflicts between the long-term interests and short-term interests. However, the theory of power management believes that the equity incentive does not resolve the conflicts of interests between managers and shareholders, in the contrary, equity incentive is more likely to aggravate the conflict between the interests.In January 1, 2006 Chinese Commission issued "measures for the administration of listing Corporation equity incentive"(hereinafter referred to as the "management approach")into the implementation of equity incentive guidance and normative documents, which also marks the equity incentive of Listed Companies in China officially kicked off, However, as more and more listing Corporation to implement equity incentive, its negative effects are also questioned by the media and investors, Among them, the most prominent problem is that the company’s managers using power to influence the timing of equity incentive, and using information superiority to control the disclosure opportunity of company information, to maximize their own interests.This paper takes Yili as the object of study, Analysis the timing behavior of the managers in Yili’s equity incentive. First, the change of the cumulative stock return of the Yili shares before and after the announcement of the stock incentive draft summary announcement is studied. Then test the information distribution of Yili company equity incentive exercise price benchmark date before and after the disclosure, Finally, the reasons for the executive choice of the shares of Yili are analyzed.Through the careful analysis of case come to two conclusions, first, Yili’s management has the lower price point of the disclosure of the draft equity incentive plan, the opportunistic behavior in the selective disclosure of information disclosure and to obtain low exercise price. Second, China need to improve related laws and regulations about equity incentive.The conclusion of this paper can avoid the manager’s opportunism behavior of the listing Corporation’s management,provide a reference for improving business performance to achieve a win-win situation between shareholders and managers; meanwhile, it is of great significance to further standardize about equity incentive system, improve relevant laws and regulations of the stock ownership incentive, dodge the new moral risk which leaded by the new equity incentive.