Research On The Mechanism Of Repurchase Restricted Stock Incentives

The amendments to the 2018 Company Law optimized the internal decision-making procedures for share repurchase,the source of repurchase funds,and the amount of shares held.At the same time,the "reward to employees of the company" was changed to "Using shares for employee stock ownership plans or stock incentives" in Article 142 of the share repurchase clause has undoubtedly brought good news for the companies conducting restricted stock incentives through share repurchases.Judging from the actual development of stock incentives in China,the number of companies implementing repurchasing restricted stock incentives is increasing year by year.For this reason,this article conducts the research on China's repurchased restricted stock incentives.It is found that the companies that implemented repurchase restricted stock incentives are mainly private enterprises.From the perspective of the industry,most of them belong to health care Industry,industrial sector and information technology industry.Among these companies,Kunming Pharmaceutical Group has implemented the stock incentives the most frequently.The content of the repurchase restricted stock incentive is characterized by its less incentive and diversified performance evaluation indicators.After further research on the misprice of stocks near the announcement date of these companies' stock incentive plans,it is found that stock incentives have market effects,most companies choose to conduct a share repurchase and announce an stock incentive plan when the stock price is undervalued,especially in the health care industry,daily consumption industry and real estate industry.And compared with companies that have never implemented stock incentives,the performance of companies that implemented repurchasing restricted stock incentives has been improved within a certain period of time.Subsequently,we choose Kunming Pharmaceutical Group,which belongs to the health care industry,for case study.First,we introduce the profile of Kunming Pharmaceutical Group,study the implementation background of its stock incentives,observe the actual implementation of stock incentives,summarize the characteristics of its stock incentive,and then evaluate the rationality of the stock incentive scheme design,and further analyze the effect of its stock incentives,including analyzing the impact of stock incentives on the company's market performance,financial performance and non-financial performance.In the analysis of the rationality of the incentive scheme design,we find its incentive scheme is innovative,applicable,and flexible,but its criteria of incentive indicators,incentive coverage and incentive strength is not scientific and reasonable.After studying the effect of stock incentives,it is found that the incentives have a certain degree of promotion effect on the company's market performance,financial performance and non-financial performance,but the promotion effect decreases as the number of stock incentive periods increases.In addition,there are suspected information leaks and management opportunism in the implementation of stock incentives.Finally,we have the conclusions of this paper: Compared with companies that have never implemented stock incentives,we find that the performance of companies that carried out repurchasing restricted stock incentives has generally been improved,and the market has also made a positive response in the short term.During the case study of Kunming Pharmaceutical Group,we find its "share repurchase with progressive assessment" stock incentive design is relatively new and the effect is significant,but the stock incentive design is still not absolutely reasonable,the strength and coverage of incentives need to be improved.And the standards for exercise conditions are low and the incentives probably include a lot of boon.In the end,we draw the enlightenment of the paper and puts forward some policy suggestions: companies should pay attention to the applicability and innovation of the stock incentive,set scientific and reasonable exercise indicators,formulate reasonable incentive coverage and incentive strength,and establish a complete internal supervision system and strengthen the independence of the board of directors,compensation committee and board of supervisors.From the external environment,we should establish a sound capital market and professional manager market,improve related laws and regulations,so that the stock incentive can better play its incentive and restrictive role.