Research On The Economic Consequence Of ZTE's Equity Incentive

With the separation of control and ownership of the company,the agency problem between the operator and the owner has become more and more important,and the incentive as one of the effective methods that have been discovered so far is widely used.As one of the most eye-catching methods,equity incentives are more talked about.In 2009,our government issued the notice on the Collection of individual income tax on Stock appreciation right income and restricted Stock income,indicating that China's equity incentive has entered a mature period at the policy level,and equity incentive has been popularized.By 2018,ZTE had conducted two equity incentives,one in the In 2006,once in 2013,it just crossed the process of China's equity incentive laws and regulations from scratch.The second equity incentive was carried out under the background of ZTE's first huge loss in 2012,so it can be more clearly observed whether equity incentive can really play an incentive role in China.In the process of the second equity incentive,ZTE,because the performance of the enterprise conforms to a series of provisions of the equity incentive scheme,The management of the company received corresponding stock options in 2015 and 2016 respectively.The failure to exercise power in 2017 was mainly due to ZTE and the relevant US governments.The department reached an agreement and claimed about $892 million in related losses in accordance with accounting standards,so it failed to meet the exercise conditions.Judging from the financial statements alone,ZTE has indeed emerged from the shadow of huge losses in 2012 in the years since the implementation of equity incentives,and has gained a foothold in the booming 4G market.But is such an outcome achieved under the influence of equity incentives? Is such a change the result of incentives for management,or is it the result of market expansion,or is it an opportunity to operate profits to gain benefits that should not have been gained?Taking the equity incentive of ZTE as an example,this paper probes into the equity of ZTE in depth.Whether the design of the incentive scheme is reasonable or not,and whether the management of ZTE has benefited from the improper behavior of opportunity,as well as the changes in the financial situation of ZTE in the course of its subsequent implementation.This paper first introduces the research background and significance;then,summarizes the positive and negative effects of equity incentive research,and their respective forms of expression,and carefully combs and analyzes the relevant theories at home and abroad.Then it briefly introduces the background and process of the implementation of equity incentive in the case company.Then,through the comparison method of the same industry company and the financial index method,this paper studies the change of the financial situation,the personnel change and the investment efficiency of the company before and after the equity incentive,and analyzes the effect of the equity incentive.Fruit Finally,the welfare and incentive of corporate equity incentive are preliminarily judged.Combined with financial indicators and other data,it is found that equity incentive leads to management compensation self-determination,earnings management and other opportunistic behavior.In this paper,it is concluded that there are some problems in the design of incentive scheme,which leads to the opportunistic behavior of management in the process of equity incentive implementation,which improves the profit of the company by undervaluing the assets.This behavior has improved ZTE's financial indicators,but its operating capacity and investment efficiency have declined to varying degrees.Next,list the relevant recommendations: during the design review period,you need to Considering the long-term nature;diversified evaluation index design;for the core technical personnel should adopt a more reasonable incentive method.