Equity Incentive And Dynamic Adjustment Of Capital Structure

According to Capital Structure Balance Theory,when the company’s capital structure equals it’s target capital structure,enterprise value is maximized.The equity incentive relates the personal interests of the executive to the maximization of the enterprise value,so when the company’s actual capital structure is deviated from the target capital structure,the executives have motivation to adjust the capital structure.In previous literatures,the factors that affect the dynamic adjustment of capital structure mainly include macro,market,system and company characteristics,etc.However,there are few literatures researching from the perspective of corporate governance,especially equity incentive.This paper empirically studies the relationship between equity incentive and dynamic adjustment of capital structure,and distinguish different direction of adjustment,different property rights to discuss the relationship between equity incentive and dynamic adjustment of capital structure.Based on the data of manufacturing listed companies from 2011 to 2016,this paper analyzes the impact of equity incentive on the dynamic adjustment of capital structure,and use group inspection and comparison test to further examine the influence of the adjustment direction and property right on the relationship between them.The conclusions of this paper are as follows:(1)The implementation of executive equity incentive can significantly improve the speed of capital structure adjustment in manufacturing listed companies.(2)The adjustment speed of capital structure is asymmetrical,and the downward adjustment speed is faster than the upward adjustment speed.(3)When the capital structure of the enterprise is higher than the target capital structure,the executive equity incentive can significantly accelerate the speed of downward adjustment;When it is lower than the target capital structure level,the executive equity incentive can not significantly accelerate the speed of upward adjustment.(4)Although adjustment speed of capital structure in non-state-owned enterprises is faster than its in the state-owned enterprises,from the perspective of equity incentive,there is no significant difference in the impact of equity incentive on the dynamic adjustment speed of capital structure under different property rights.After replacing control variables,explained variable and compensation incentive,the results are consistent with the original regression results,which proves that the results of this study are robust.