Research On The Failure Of A-listed Company Equity Incentive

As the rapid development of modern economy,the breakaway of proprietary rights and management rights is an inevitable result,which brings serious agency problem.By giving executives equity incentive,the executives' interests will be bound up with the enterprise's interests,which will help to achieve the goal-congruence.However,equity incentive also brings a series of new problems,such as self-benefiting of executives,earnings management,stock price manipulation etc.Therefore,how to rationalize the implementation of equity incentive has become the hotspot both in theoretical field and practical field.In this paper,we take WoSen Biology(an A-share listed bio-pharmaceutical company)as an example.After analyzing the motivation of equity incentive,the investment behavior after the equity incentive and the change of corporate performance,we try to find out the reason why its equity incentive plan ended in failure.Then,based on the previous scholars study,we put forward some recommendations for listed company how to implement equity incentive properly.Based on the documentary research and case analysis,this paper drew four main conclusions.First,the motivation of listed-company equity incentive can be divided into two types:incentive executives' equity incentive and non-incentive executives'equity incentive,and the non-incentive executives' equity incentive can be furtherly divided into two types:the welfare one and the redemption one.The motivation of WoSen Biology equity incentive is the type of redemption.Second,the motivation of equity incentive can be affected by both external factors and internal factors.The motivation of Wosen equity incentive is mainly affected by the industry competition and the corporate governance.Third,the company which take the redemption equity incentive is more inclined to external acquisition to do the tunneling.Forth,equity incentive can cause the alignment effect or the entrenchment effect.The equity incentive of WoSen didn't cause the alignment effectThe innovations of this paper are mainly include the following three aspects.Firstly,we start from the motivation of equity incentive to analyze the relationship between the equity incentive and economic consequences.Secondly,we add an intermediate factor—the investment behavior after the implementation of equity incentive when we study the relationship between the equity incentive and corporate performance.Thirdly,we put forward complete suggestions on how to design and implement a reasonable equity incentive plan.Also,we propose the idea of "flexible equity incentive".