An Empirical Study On Market Timing And Implementation Effect Of Equity Incentive

Since the advent of equity incentive in the 19 th century,it has been an important way to alleviate the principal-agent problem and make the company management more closely related to the company value.However,blindly following the trend and ignoring their own needs to use equity incentive is bound to expose a series of problems.For instance,Microsoft and Citi canceled the implementation of the equity incentive,what's more,due to the abuse of equity incentive,Enron,Worldcom and other companies exposed a variety of scandals.In contrast to the original idea of promoting economic development and improving enterprise salary system,equity incentive gradually becomes a mean for executives to seek benefits.The financial,accounting and management sectors have paid extensive attention to the possible moral hazard caused by equity incentive.The researches on equity incentive have been countless so far.Most literature studies on the implementation effect of equity incentive only examine the significance influence of equity incentive intensity on corporate performance,ignoring other important factors such as the proportion of senior executives' incentive and vesting conditions.At the same time,the effect of equity incentive is inter-temporal and continuous.However,there is a lack of research in implementation effect in the aspect of lag effect.Based on the objectives above,the research on the implementation effect of this paper includes two parts: the implementation effect of scheme elements and the lag effect.Non-equilibrium panel data regression and differential GMM method are used to analyze the implementation effect of equity incentive respectively.This paper selects the equity incentive plans issued by all A-share listed companies as the initial samples for empirical research during the nine years from January 1st,2009 to December 31 st,2017.The following conclusions can be concluded: it shows different incentive effect in the research of equity incentive implementation when the whole sample was divided into restricted stock and stock options.(1)With regard to restricted stock subject matter,there is an interval effect between the element of validity period and the effect of implementation,and the validity period at the inflection point is 5 years.The factors of the proportion of executive incentive and the effect of implementation show negative influences.The stronger the equity incentive is,the more stringent the exercise conditions are,the higher the discount rate of grant price is,and the better the implementation effect of restricted stock incentive is.(2)When it comes to the stock options,the incentive intensity is uncorrelated with enterprise performance.Increase the proportion of incentives for senior executives can enhance enterprise performance,but the effect of the factors of validity period and exercise conditions on the implementation effect is not significant.(3)The lag effect exists in the implementation effect of equity incentive.In terms of lag effect,the return on equity of the first and second lagging periods both have a negative impact on the return on equity of the current period.There is a significant positive correlation between the enterprise performance and the total asset turnover in the current and the first lagging period.In conclusion,It can be showed that the importance of the corporate sustainable development and the performance of the current period is closely related to the performance of the enterprise in the future.Moreover,the enterprise should formulate strict conditions for the unlocking of equity incentive,consider the restricted stock and coordinate the structure of incentive distribution objects.Finally,the enterprise should combine the equity incentive elements with its unique development and tailor the best plan to make the implement of equity incentive efficiently.