Effect Of The Equity Incentive On The Performance And The Price Of Listing Corporations In China

Equity incentive system was born in 1950 s,as a major mechanism innovation, it was invented to solve the principal-agent conflicts from the separation of ownership and management rights in modern enterprise management. In 1980 s, as the representative of western countries, American listing Corporations widely used the equity incentive, and achieved a good result finally. Our country tried the pilot of equity incentive in the early period of the securities market, until the Securities Regulatory Commission promulgated "The measures for the administration of the listed company equity incentive"(for Trial Implementation) and provided regulatory guidance and policy support for Chinese Listing Companies Implementing equity incentive in 2005, the equity incentive system achieved a rapid development. Especially since 2010, with the slowdown of Chinese economic growth, the listing Corporations were worried to seek ways to enhance their performance, as a result, equity incentive become a good choice.Because of the insufficient of companies implementing the equity incentive, the previous domestic scholars’ study was lack of a large data base. Fortunately, the samples were more since 2010. According to wind database statistics, until December 31,2015, listing Corporation in Shanghai and Shenzhen Stock Exchange have already announced a total of 1112 equity incentive plans, providing enough data support for the research of the Equity incentive effect. On the basis of previous scholars’ research, this paper studies the present situation and effect of the implementation of equity incentive in our country by using the methods of normative analysis and empirical analysis.Firstly, this paper explains the relevant concepts and theoretical basis of equity incentive: Equity incentive related concepts includes the concept, target, elements of equity incentive and other concepts; The theoretical basis mainly includes the principal-agent theory, incentive theory, human capital theory and so on. The development of the theory has accelerated the generation and improvement of the equity incentive system. What’s more, by listing the development course of the equity incentive policy and law and the present situation of the listing Corporations’ equity incentive, the paper finds that in recent years, the number of equity incentive of listing Corporations in China is increasing rapidly, the success rate is rising either and some other situations.Secondly, this paper makes two empirical studies on the performance of listing Corporations and the change of stock price after the implementation of equity incentive. In the part of performance, this paper selects 588 copies which are from the 2005-2014 listing Corporations who got successful implementations of equity incentive for the study sample. Treating ROE as the being explained variable, the equity incentive amount, incentive period, the subject of incentive as the explanatory variables, the asset liability ratio, total assets and some other index as the control variables, this paper establishes a multiple regression model and comparative analyzes the impact of equity incentive on the performance of listing Corporation in China. The results show that during the period of equity incentive, listing Corporations performance better; The amount of incentives and performance show a positive correlation; Restricted stock subject to the Corporations’ performance is better than the stock options, etc.. What’s more, after the equity incentive, performance of the company significantly declines, indicating that the long-term perspective of equity incentive effect is poor.In the part of the stock price, using the same sample, the paper comparative analyzes the change in the long-term stock prices after the announcing of the equity incentive plans by testing the t variable and mapping the result. The empirical results show that the equity incentive has a significant effect on the performance of listing Corporation’s stock price in China, and The promotion difference of restricted stock and stock options on the stock price performance is not obvious.Finally, this paper gives a comprehensive comparative analysis of the empirical results, and puts forward the following policy recommendations: the first one is listing Corporations should implement the suitable equity incentives for their own;secondly,linking the exercise conditions and the performance of listing Corporations after the equity incentive;the third one is to establish a normative constraint mechanism;then,the government should improve the laws and regulations of equity incentive;finally,relevant departments strengthen supervision and reduce the market manipulation of the stock market.