Research On Relation Among Equity Incentive Preference,contract Elements And The Efficiency Of Investment

The equity incentive system first cane into being in American, and was introduced into China in the 90’s of last century. In 2006, the SFC issued the Listing Corporation equity incentive management measures(Trial), which means the equity incentive system in China had taken off in earnest. After that, the equity incentive system developed fast. Because it was not a long time since the system was taken off in earnest, the companies inevitably met many difficulties when made use of this system. In this dissertation, first,we study the effect on investment efficiency of using equity incentive. Then we’ll make an advanced research,studying the contract elements’ effect on investment efficiency. This research can define the mechanism of equity incentive system, and finally make advisement on improving the effectiveness of it.First,we select the listing companies’ data between 2010 and 2013 in Shanghai and Shenzhen. Then we estimate the unexpected investment by using the Richardson Model. We divide the unexpected investment into two parts: over-investment and under-investment,study whether the equity incentive has significance effect on them separately. As a result,the listing companies with equity incentive have a better behavior both on over-investment and under-investment than the listing companies without equity incentive.Second,we divide a equity incentive into six individual elements,select four elements, including the exercise conditions, the incentive period, the incentive intensity and the excitation mode. The results show that making serious exercise conditions and longer incentive period can bring further oppression effect on over-investment and under-investment behaviors. However, changing incentive intensity and excitation mode won’t make any differences.Finally, according to the consequences of this article, we advise that the corporations with inefficiency investment can improve their investment efficiency by using equity incentive system. Besides, we command when corporations are designing equity incentive contracts, they should choose strict exercise conditions and incentive period to make full use of the equity incentive system.