A Study On The Market Effect Of Equity Incentive In China's GEM

As a complementary mechanism of the main board market,the GEM mainly servies the high-paying technology enterprises which are unable to be listed on the main board,but growth is better.These enterprises have the following characteristics:Firstly,it involves the frontier of business comparison.In the process of development,it is necessary to hire high-quality talents from outside,so the agency cost is relatively high;Second,GEM listed companies have poor short-term profitability,unable to pay high salaries to attract talents,which have affected the development of enterprises.The equity incentive system solves the above problems well,On the one hand,Equity incentive gives operators a certain amount of economic power similar to equity,it makes the operator have some shareholders' rights,thus,it promotes its owner's interest and reduces the agency cost;On the other hand,equity incentives have changed the compensation mechanism of enterprises,replacing some short-term compensation with long-term compensation,which is more conducive to attracting talents while easing the cash flow of enterprises.Therefore,equity incentives have been widely used in the gem market.Due to equity incentives are designed to improve business performance and improve enterprise value,and the GEM listed companies' stock market performance represents the investors' value estimates to the enterprise.But the GEM started late in China,only for nearly ten years since the establishment,so the relevant system is not complete,the regulatory approach is not perfect,and the GEM's price discovery function may not be ideal.To investigate the market effect of equity incentives in China's GEM,this paper collects the data of all the companies that issued the equity incentive plan from 2013 to 2016 in the GEM,after eliminating the interference factors,there are 94 sample companies.First,adopt event study method,build the market model to calculate the ACAR of the total sample,and carried out significance test,to analyze the market reaction after the equity incentives.Then,this paper takes the same method to analyze the sub-samples to test whether the degree of market reaction is related to the subject matter of equity incentive.Finally,in order to further analyze the main factors that influence the degree of market reaction,this paper has sorted out six possible influencing factors,and analyzed them through the establishment of multiple linear regression models.In addition,in order to ensure the conclusion,this paper has conducted robustness test in all aspects.The results show that:1.The launch of the equity incentive plan triggered a short-term overreaction in the market.2.The market effect will appear before the public release of the equity incentive plan,indicating that there is an advance disclosure of the information.3.The degree of market reactions caused by equity incentives are influenced by factors such as company size and profitability.