An Empirical Study On The Influence Of The Top Managers’ Equity Incentive On Outward Foreign Direct Investment

In recent years, the development of China’s outward foreign direct investment(OFDI) grew rapidly, by the end of 2015, the total amount of OFDI reached 73.508 billion yuan, increased 14.7% compared to last year, the cumulative amount of total non financial OFID is 5.4 trillion yuan. With China’s economic transformation, and the "The Belt and Road" 、 "going out" et.al strategies,Chinese enterprises’ s outward foreign direct investment will be a normal phenomenon. There are many factors that encourage enterprises to implement foreign direct investment, it is generally believed that the host country’s market, trade, exchange rate, the home country’s economic development level, taxes, wages and national governance level occupies a dominant position. Previous studies have indicated that the senior management has a significant impact on the enterprise’s foreign direct investment. According to agency theory and human capital theory, because of the separation of the two rights and the risk aversion of executives, executives are likely to harm the interests of investors for their own interests. In order to solve this kind of agency problem, equity incentive is considered as an effective way to solve the agency problem.First, the foreign direct investment itself is different from the general investment from risk and return characteristics,whether equity incentive can promote the senior management make foreign direct investment is a question to be tested. Secondly, different from western corporations, Chinese enterprises in the process of "going out", the state-owned enterprise occupies a large proportion, even the role of leader.State-owned enterprise’s ownership and ownership structure is differs from many other corporations. Whether the equity incentive can play its due role is yet to be tested. Third, the equity incentive is influenced by internal and external constraint mechanism. Whether the restraint mechanism will have an impact on the relationship between equity incentive and foreign direct investment, and the how much of the degree of this influence is? Some of the above issues about equity incentive and foreign direct investment is the focus of this paper.At the beginning of this paper, we described the background and significance of the research of the relationship between equity incentive and outward foreign direct investment,and put forward the related issues, then the previous research about equity incentive and foreign direct investment in the domestic and foreign relevant literature reviews. On this basis, this paper puts forward the related hypothesis, establishes panel data model, filter 560 samples and define the object of study. Finally, the empirical test is conducted on the research object. Empirical results show that:(1) equity incentive intensity in a certain range has certain role in promoting outward foreign direct investment. However, when the equity incentive strength reaches a certain extremal, it will have a reverse effect.(2) under the incentive of executive stock ownership, the outward foreign direct investment of state-owned enterprises is higher than that of private listing Corporations.(3) the influence of the equity incentive on the foreign direct investment is restricted by the internal and external mechanism of the company,In detail,the equity incentive exercise constraints can promote outward foreign direct investment, the cross coefficient of the stock incentive and exercise constraint condition is significantly positive, indicating that the exercise constraints has positive effect on the relationship between equity incentives and foreign direct investment; In the concentrated ownership structure corporation, executives are more willing to promote outward foreign direct investment, and high level of ownership concentration can strengthen the positive effect of equity incentive on foreign direct investment; good external constraint mechanism can promote foreign direct investment, but the external mechanism and equity incentive is a complementary relationship in the promotion of outward foreign direct investment; large shareholders can have a significant impact on the management of foreign direct investment behavior; on the whole, restraint mechanism by adding the adjusted goodness of fit, we can consider that the constraint mechanism can enhance the effect of the implementation of equity incentive.