Equity Incentives And Corporate Risk-taking

There is a problem in the principal-agent problem caused by the separation of the two powers of the company: the risk-averse management team abandons those risky but high-yielding investment projects for the sake of their own interests,such as career and on-the-job consumption,thus damaging the value of the company.Equity incentives transform managers' identities into ownership owners who are more relevant to corporate interests,think about issues from the perspective of shareholders,and pay more attention to the company's long-term development and long-term interests.Then,can we promote corporate risk-taking through equity incentives? Will the relationship between the two companies of different equity nature be different? What are the differences between the two companies with different growth? This article will analyze the above issues.This paper firstly based on the concept of equity incentives and literature review,the concept of enterprise risk commitment and literature review,principal-agent theory and prospect theory,theoretical analysis and exploration of the relationship between equity incentives and corporate risk-taking,guided by the above theoretical basis,derived this article The research hypothesis,then through the empirical research method,taking all the A-share listed companies in 2007-2016 as a sample,using the adjusted ROA volatility as a measure of enterprise risk-taking,using the double difference method research method,studied Whether the implementation of equity incentives will affect the risk exposure of the enterprise,and study the impact of the nature of equity and the growth of the firm on the relationship between the two.The main conclusions of this paper are as follows: First,equity incentives can improve the risk-taking level of enterprises.From the perspective of managerial interests,by granting equity,the manager is transformed into a ownership owner more relevant to the interests of the company,which enhances the manager's sense of responsibility for the business management of the enterprise,avoids the adverse effects of short-sighted behavior on the enterprise,and pays more attention to The long-term value of the company has increased.Equity incentives are relatively fair,which gives managers the opportunity to enjoy the benefits of the company's long-term value enhancement,as well as the losses caused by decision-making mistakes.Equity incentives enable managers to make more favorable decisions about the company's development when making relevant risk decisions,which will also enable companies to present better risk exposure.Second,the nature of equity will have an impact on the relationship between the two.Compared with state-owned enterprises,the implementation of equity incentives in private enterprises can improve the level of risk-taking.First,the lack of state-owned enterprise owners,the lack of efficiency and effectiveness of managerial supervision,the imperfect manager incentive mechanism,and the state-owned managers' compensation are subject to administrative control,which will lead to moral hazard and opportunism of managers in business decision-making.Behavioral problems are more serious than non-state-owned enterprises;second,the government's functions of state-owned enterprises make it tend to be a steady investment.Third,there is a greater chance of failure behind the higher-risk projects,and once the individual's political career fails,it will be affected.Third,the growth of the company will have an impact on the relationship between the two.Compared with the enterprises with low growth,the implementation of equity incentives in high-growth enterprises can improve the risk-taking level.When the company has higher growth opportunities,the marginal utility brought by investment behavior is large.Implementing equity incentives can encourage managers to grasp growth opportunities and choose high-risk projects;when the company's growth is low,it is limited by the company's own inherent limitations.The growth space is small,and even if it bears a large risk,it may have little effect.At this time,the marginal utility brought by the investment behavior is small.It is difficult to see that the equity incentive has an incentive effect on the management.