Research On The Equity Incentive Effect Of GEM Companies

In order to effectively solve the principal-agent problem and improve the level of corporate governance,equity incentive mechanism came into being.The mechanism of equity incentive is to transfer part of the company’s equity to its managers,so as to form a community of interests with the owners,so as to mobilize the enthusiasm of the managers,so as to promote the long-term stable development of the company and improve the level of corporate governance.Companies in China’s GEM market generally have the characteristics of great development potential and strong growth.However,due to their late start and small size,most companies have weak ability to deal with risks.Under the increasingly fierce market competition environment,the performance of some companies fluctuates greatly and their performance is not very outstanding.The development of GEM listed companies is inseparable from the full use of human capital,but the existence of principal-agent problem has a certain degree of containment effect on the growth of the company,while equity incentive can better solve the incentive mechanism problems in the development of listed companies,effectively improve their corporate governance level,and then realize the sustainable and healthy development of the company.From the perspective of practice,the GEM market accounts for a large part of China’s equity incentive.However,the effect of the equity incentive of GEM companies has become one of the important issues in the theoretical and practical circles.Based on the research and analysis of relevant literature at home and abroad,under the guidance of principal-agent theory,human capital theory and incentive theory,this paper makes a specific research on the equity incentive effect of GEM companies from the perspectives of corporate performance and market response,and theoretically analyzes the internal mechanism of the correlation between corporate equity incentive effect and corporate performance and market response.Based on this,this paper selects China’s GEM listed companies from 2015 to 2019 as samples,and explores the correlation between equity incentive and corporate performance and market response by using empirical research methods such as descriptive statistical analysis,correlation analysis,multiple regression analysis and robustness test,as well as event research method analysis based on market model.The empirical results show that:(1)The overall development of GEM companies is uneven,the level of enterprise performance is uneven,and the proportion of enterprises implementing equity incentive in GEM market is relatively stable;(2)There is a significant positive correlation between the implementation of equity incentive and enterprise performance,and the incentive effect is obvious;(3)Companies with large scale,low financial leverage,good growth,high concentration of equity and high turnover of total assets are more suitable to implement equity incentive,and the incentive effect is more significant;(4)Most GEM companies use restricted stock to implement equity incentive,and its incentive effect is obviously better than stock option;(5)The issuance of the equity incentive plan of GEM companies can lead to positive excess returns,and the market has a positive response to this,and this response has a certain degree of sustainability.Based on the theoretical analysis and empirical results,this paper puts forward some countermeasures and suggestions on the equity incentive of GEM listed companies.