An Empirical Research On The Correlation Between Equity Incentive And Corporate Performance Of The Listed Companies In China

With the development of economy and the establishment of capital market, equity incentive has been treated as a very important part of corporate governance, and has been a long-term excitation mechanism and practiced widely in China. There are 597 listed companies which had announced their equity incentive plans during 2005 to 2013. Therefore the academic circles and listed companies began to pay more attention to the effects of equity incentive.Equity incentive can encourage and constraint the managers and core staff to work hard to improve the corporate performance, which can maximize the shareholders' wealth. Meanwhile, because of the information asymmetry, sometimes there will be the ethical risks, equity incentive system can avoid these risks by connecting the staff's personal interests and corporate collective interests. However, equity incentive sometimes can also lead to bad effects without proper use. Therefore, it is very necessary to find out how well equity incentive can really improve corporate performance.This article is aimed at the correlation of the equity incentive and corporate performance by six parts, which has used two research methods such as standard study and empirical study. Above all, this article has reviewed some related literatures, which laid the foundation of theoretical basis and also introduced the definition and the meaning of this research. Then, the article described the background and introduced the current situation of equity incentive in China, which had laid the groundwork to come up with hypotheses and set the variables. Thirdly, the article chose 39 listed companies which had successfully implemented the equity incentive plans during 2010 to 2013 as the research samples and make analyses and finally found out following conclusions:(1)The implementation of equity incentive in China has improved the performance of the listed company, but the effect was not significant.(2) Different with the assumption, there isn't an apparent association between incentive ratio and ROE.(3)The restricted stock will produce better than the stock option.(4)The longer validity period of incentive will produce better than the short-term. Based on these conclusions and also combined with the present situation of the market in China, this article analyzes the reasons and puts forward some opinions and suggestions at last.