Empirical Research On The Relationship Between The Equity Incentive And Performance Of Listed Companies

As a kind of long-term incentive mechanism, the equity incentive is considered to be an important mean to solve the principal-agent problem exists in modern enterprises. Equity incentive originated in the United States, more than 80% of the listed companies have carried out the equity incentive mechanism. Since the equity division reform of 2005, the number of listed companies using the equity incentive mechanism has seen a big increase. Though it developed rapidly, there are many existing problems in the actual operation.The relationship between equity incentive and corporate performance is the focus of researchers. Most of studies abroad think that equity incentive and corporate performance are positively related. But the domestic empirical researches got very different conclusions. The main reason is that metrics selection, sample selection and research methods exist significant difference.The empirical research studied the relationship between the equity incentive and performance through 1207 valid samples data of 554 A-share listed companies implementing the equity incentive,using multiple regression model with the EPS, ROE, Tobin Q as the explained variables of corporate performance respectively. We studied the real impact of the equity incentive on corporate performance, and we also tested whether the "interval effect" exists between the two. Then we studied the influence incentive mechanism designing factors to equity incentive effect. In order to ensure that the empirical research is scientific, objective, professional, the measure index data of the corporate performance and equity incentive are all from CSMAR database.Through sample descriptive statistics analysis, we find that the domestic implementation of equity incentive plans of listed companies has increased significantly since 2005 equity division reform. The industry adopting the equity incentive is mainly in manufacturing industry, and taking stock options and restricted stock companies accounted for the majority. We also find the issuing proportion of the total share is almost below 4%, and the validity mainly distributes among 4-6years,the comprehensive waiting period among 6-8years.Through the empirical study, we found that the implement of equity incentive plan does improve the corporate performance. And we find there is no so-called "interval effect" between the two. We also find that the validity of equity incentive mechanism and the comprehensive waiting period are both negatively correlated with corporate performance. That is too long designed period of equity incentive mechanism will have a negative effect on the effectiveness of the equity incentive on the corporate performance.This paper is divided into the following five parts. The first chapter is the introduction part, introducing the research background and significance of the topic, research reviews, the research methods, and the possible research innovation. The second chapter is theory analysis of the equity incentive, corporate performance and an overview of the current situation, also introducing the connotation, factors, measures of equity incentive and company performance. And we also elaborated the mechanism between the two. The third chapter is the empirical research design, introducing the hypothesis, the sample and data processing method, variable selection and model design. The fourth chapter is the empirical test part, including descriptive statistics analysis, correlation test to exclude the multicollinearity problem, the regression analysis,the robust test. The fifth chapter include conclusions and policy recommendations.