Research On The Effectiveness Of Equity Incentive In State-owned Enterprises

As an important mechanism of solving agency problem in corporate governance,equity incentives have been widely used all over the world since its birth in 1950 s.In 2006,after China Securities Regulatory Commission issued The Listed Companies Equity Incentive Management Approach(Trial),the equity incentives of listed companies in China entered the stage of rapid development.And the number of equity incentives has been increasing rapidly.However,the state owned listed companies launch equity incentives increasing slowly.Regulations in China are more stringen on the implementation of equity incentives of listed companies to compare with foreign companies.In order to avoid the loss of state-owned assets,the implementation is more strict for equity incentives regulation of state-owned listed companies.In recent years,the reform of state-owned enterprises executives compensation has been taken highly attention to the public,its purpose is to adjust and optimize the structure of the head of state-owned enterprises,to implement long-term incentive mechanism.In theory,equity incentives can give a reasonable compensation according to the degree of effort to the incentive targets.The mechanism whether can achieve better results of state-owned enterprises still controversial.In the context of the incentive amount,incentive period,incentive conditions and other factors are under strict supervision,what problems did the stated-owned listed enterprises faced in the equity incentive implement in practice? whether state-owned listed enterprises' equity incentives plan gained desired incentive effects? These issues have certain research value.This paper select from classical cases of the China's first implementation of equity incentives in central state-owned listed companies-FiberHome company's two equity incentives plan.Identify the real motivation of equity incentives from the incentive ranges,incentive price,incentive conditions,unlock arrangement etc.,on this basis then analyze the economic consequences of equity incentives.Through the comprehensive analysis of the distribution of the incentive targets and use the relevant valuation tools to measurement the incentives degree of incentive plan,the conditions of the grant and unlock get the conclusion that the two incentives plan are inclined to incentive model.We find that according to the regulatory authorities on the amount of incentives,the first incentive plan have the problem of insufficient incentive and incentive range is too small,and the problem existing in the first phase of the equity incentive are improved in second restricted stock incentive plan.Using the event study method to research the market reaction to the incentive plan draft released,we find that the draft announcement on the first day of the company's share price has been a positive response,indicating that the market hold a positive attitude to state-owned enterprises to launch equity incentive.Then the CAR of the stock price shows a clearly downward trend in the first incentive plan and a clearly upward trend in the second incentive plan,indicating that the market is not optimistic to the first incentive plan,but optimistic to the second equity incentive plan.Through the comprehensive study of the change of financial indicators to the equity incentives,complement by the analyze the change of economic value added(EVA),attract and retain talent,investment status,innovation status,dividends and management fees and other aspects.Generally speaking,the equity incentives of FiberHome played a positive role to enhance the company's operating performance.Equity incentives can improve the retention of corporate executives,contribute to unify the long-term interests of the management with enterprises,increase long-term investment,enhance enterprise innovation,thus reducing agency costs.Finally,we get the conclusion that under the circumstances of reasonable incentive clauses,the equity incentive of state-owned enterprises can obtain better incentive effect.Through the study of Fiberhome equity incentive plans,in view of the deficiencies in the case of the company's equity incentives plan and the aspects worthy of reference,this paper finally puts forward specific policy recommendations for state-owned enterprises and relevant regulatory authorities.