Research On Management Opportunistic Behavior In Equity Incentives Of Listed Companies

By binding the interests of shareholders and incentive recipients to form a community of interests,equity incentives can play a positive role in alleviating the agency conflicts arising from the separation of powers and have become an important tool of corporate governance.This model of sharing benefits and risks can urge the management to work actively to improve the company’s business performance and ultimately achieve the purpose of increasing shareholders’ wealth.However,more and more theoretical studies and practical experiences have found that the implementation of equity incentives in listed companies has not achieved the expected effect.The reason for this is mainly due to the existence of unreasonable internal governance structure,information asymmetry,and unsound external regulation,which induce opportunistic behaviors of management,such as influencing draft design,implementing timing behavior,and conducting surplus management.This weakens the proper incentive attributes of equity incentives.Based on this background,this paper argues that it is necessary to study the opportunistic behaviors of management in equity incentives.Based on the existing research results,this paper selects Riland,a listed company in China,and uses its equity incentives implemented in 2017 as a case study.Firstly,this paper analyzes the motives,paths and economic consequences of management’s opportunistic behavior in equity incentives at the theoretical level.Then,this paper elaborates on the background and process of the implementation of Riland’s restricted stock incentive plan,and conducts an in-depth study on the motives and paths of management’s opportunistic behavior in the implementation of equity incentives,followed by an analysis of the economic consequences caused by opportunistic behavior from two perspectives: financial performance and stock price trend.Finally,the paper draws conclusions and makes suggestions on how to prevent management from taking opportunistic behavior in the process of equity incentive implementation to seek excessive benefits for themselves.After the research,this paper finally comes to the following conclusions:(1)The motivation of opportunistic behavior of management in the equity incentive of Riland is divided into internal and external factors,including insufficient monetary compensation incentive,defective board structure and insufficient independence of the compensation and evaluation committee,while the external factors include incomplete capital market and inadequate equity incentive mechanism.(2)Riling’s management will adopt different paths of opportunistic behavior to implement the equity incentive according to different stages of the equity incentive.In the draft stage,the management will influence the design of the draft to lower the performance threshold;in the draft announcement stage,the management will choose the draft announcement date to lower the grant price and manipulate the information disclosure to match the timing of the announcement date;in the performance evaluation stage,the management will implement positive surplus management to ensure the performance target;in the unlocking stage,the management will choose the low share price as the unlocking date to reduce the personal income tax payment.In the unlocking stage,the management will choose a lower share price as the unlocking date to reduce the amount of personal income tax paid.(3)This paper uses factor analysis to score the financial performance of Riland before and after the implementation of equity incentives,and finds that its financial performance decreases rather than increases,while its share price is also negatively affected.Therefore,the opportunistic behavior of Riland’s management did not achieve the set goal of improving corporate performance and increasing shareholders’ wealth,and lost its proper incentive effect.