Study On The Market Reaction Of Stock Option Incentive Of GEM Companies In China

Equity incentive is a kind of way for companies to attract and retain core talents and to encourage management teams.It refers to the listed company gives company personnel(especially the company's senior management personnel and the key technical personnel)restricted stock or stock options as a way to combine incentive targets and the shareholders'interests.In addition,equity incentive can help the operation managers use the indentify of shareholders to participate in the company's decision-making process.In this way,the operators and owners share risks and profits so that they can solve the principal-agent problem in a certain extent,finally equity incentive can achieve the ultimate goal that managers would work hardly for the company's long-term development.Usually the announcement of equity incentive will affect investors' expectations and then affect the stock price.At the same time the announcement will bring the fluctuation of stock price which means that it will give rise to market reaction.Deeply the abnormal fluctuation has very important influence on the value of the company.This paper selected GEM listed companies which announced equity incentive plans during 2014-2016 as research samples,and then used events study method to empirically analysis the market effect of equity incentive announcement.Through analyzing the whole 82 samples,the results indicate that the announcement of equity incentive of GEM listed companies has positive market effect and obvious improvement on stock price,but the duration is short;Second,GEM listed companies have different industry sectors,the market effect of equity incentive is also different.At the same time,the majority of companies uses restricted stock incentive mode,and the companies which use restricted shares as a way of equity incentive have more degree of market acceptance than those companies which use stock options;furthermore,the company's share price has significantly positive abnormal returns rate before the announcement of equity incentive,this information relates to equity incentive announcement was leaked out in advance.