Environmental Uncertainty,Equity Incentive And Inefficient Investment

Inefficient investment will damage the enterprise value.For the long-term development of the enterprise,it's very important to improve the efficiency of investment.China's economy is in a transition period,in which environmental uncertainty is increasing substantially and stock market shocks frequently.In the perfect capital market,only the enterprise's investment demand will affect the investment behavior.But in reality,because of agency problem,information asymmetry and other issues,the various changes in the environment are likely to cause adverse effects on investment,which is easy to lead the tendency of short-term investment behavior.In the modern joint-stock enterprises of western developed countries,the equity incentive is prevailing,and it can play a role in the long-term incentive and restraint.Giving operators a part of the equity through equity incentive unifies the interests and target of shareholders and executives objectively,and eases the principal-agent problem.In our country,the real equity incentive appeared relatively late,and is in the process of continuous improvement.Most of the equity incentive plans of this period view a single performance conditions as the assessment criteria and have very short period of validity.But achieving benefit from investment is a long-term process.Besides the enterprise value,there are many factors that affect the stock price.If the enterprise is carrying out the equity incentives,executives are more motivated to improve short-term performance,to enhance the stock price,rather than to improve the efficiency of investment firstly.At this stage,whether China's equity incentive system can reduce the short-sighted behavior of executives,improve the efficiency of investment,especially in the uncertainty environment is a problem worth exploring.This paper aims to explore the corporate governance effect of the implementation of equity incentive on inefficient investment,especially inefficient investment under the uncertain environment,and further studies the differences in enterprises with different nature of property rights.So this paper reviews and comments the related literature about the environmental uncertainty,equity incentive and investment efficiency at home and abroad.Then it defines three concepts of the inefficient investment,environmental uncertainty,equity incentive,and expounds the theory of principal-agent,human capital and environmental uncertainty.Next,this paper puts forward the research hypotheses on the basis of theoretical analysis of the relationship among environmental uncertainty,equity incentive and inefficient investment.After that,select data from 2010 to 2015 of listed companies in Shanghai and Shenzhen A-share markets to verify the hypothesis.Finally,the following conclusions are drawn.Firstly,Environmental uncertainty will aggravate the ineffective investment of listed companies,and compared to the state-owned enterprises,the aggravation in non-state enterprises is bigger.Secondly,the implementation of equity incentive can effectively inhibit underinvestment,but could not effectively inhibit overinvestment.Compared with the state-owned enterprises,the inhibition against underinvestment in non-state enterprises is better.Thirdly,the implementation of equity incentive can effectively restrain the underinvestment caused by environmental uncertainty of non-state enterprises.