Analysis Of The Effect Of Equity Incentives In CRO Listed Companies

Many companies have developed and grown through the establishment of a sound system for operating the Chinese capital markets.In order to meet the management needs of growing companies,many companies have adopted an agency system,in which management is entrusted with the management of the company.However,the agency system has an important drawback:there is a conflict of interest between the owners of the business and the actual management.The business owner is concerned with the long-term growth of the business,while the manager is more concerned with short-term business interests.To resolve this conflict,many companies have adopted equity incentive plans that make management owner-conscious and align the interests of both parties from the owner’s perspective.In addition,as the competition in the human resource market increases,the fixed salary system can no longer guarantee the centripetal force of the company’s core staff.Therefore,increasing the incentive rate of the company or introducing the equity incentive system can increase the centripetal force of the company’s core personnel and improve the competitiveness of the company in the external talent market.For this reason,many large companies are now using equity incentives in their company management.CRO(Contract Research Organization)means Contract Research Organization,which is a company or organization that provides specialized outsourcing services for various aspects of drug and pharmaceutical R&D by accepting contracts from pharmaceutical R&D companies.The paper selects the CRO listed company Wu Xi App Tec as the research object,and analyzes the changes in the company’s performance before and after the two equity incentives by comparing the event study method,non-financial and financial index analysis methods.The impact of equity incentives on the company’s performance is explored and the changes in performance are further analyzed.Firstly,the research on the concept,motivation,choice of method and the effect of equity incentive program at home and abroad are reviewed,and a brief overview of the relevant theories appears in the paper is given.Finally,according to the implementation effect,the problems of single incentive model and unreasonable selection of incentive targets,unreasonable setting of performance evaluation index and short-term effect of the incentive program of Wu Xi App Tec were found.On the basis of this,the optimization suggestions are given to the problems related to the equity incentive program of Wu Xi App Tec,which is hoped to be helpful to other listed Chinese CRO companies in implementing equity incentives.