The Impact Of Management Equity Incentives On The Financialization Of Entity Enterprises

In recent years,there has been a phenomenon of financialization in China’s real economy.With the disappearance of China’s demographic dividend,the gradual rise of land costs,environmental protection costs and raw material prices,coupled with the inability to control the most valuable and high-yield links in the global industrial chain,the produced products and services can not bring considerable benefits,and the return on investment of the real economy continues to decline.Due to the prosperity of the financial industry,physical enterprises have further invested a large amount of funds in the financial and real estate industries with short investment return cycle and excess return,resulting in the false prosperity of China’s financial market and sharp price fluctuations.Finance is separated from the real economy,and a large number of industrial capital can not be effectively created in the financial system.Excessive financialization increases the financial risks faced by the market,seriously affects the implementation effect of industrial policies and damages the healthy development of real enterprises.As the managers of the enterprise,the investment direction of the enterprise’s funds is naturally determined by the executives.If the executives decide to take financial investment as the main investment direction,it may aggravate the degree of financialization of the enterprise.Modern enterprises face the problem of separation of two rights.The management who maximizes personal interests will prefer the financial and real estate industries with high rate of return and ignore the development of the main industry.As a potential governance mechanism of "real virtual balance",equity incentive makes managers become owners at the same time,keeps the personal interests of the management consistent with the interests of the enterprise to the greatest extent,and can alleviate the principal-agent problem faced by the enterprise,so that the short-sighted management pays more attention to the long-term sustainable development of the enterprise.What is the overall effect of management equity incentive on financialization? What is the mechanism of action? What are the constraints? Using the panel data of all A-share listed companies from 2007 to 2017 and the comprehensive propensity score matching method,this paper makes an empirical study on the inhibitory effect,mechanism and conditions of equity incentive on financialization.The results show that:(1)equity incentive inhibits financialization;There are differences between stock options and restricted stocks in restraining enterprise financialization.Restricted stocks with more symmetrical rights and obligations have a stronger inhibitory effect.(2)It may be to play the role of "reservoir" of financial assets and reserve funds for the main business.After the implementation of incentives,short-term financial assets show an increasing trend;After the implementation of equity incentive,the long-term financial assets show a decreasing trend,and the mechanism of long-term financial inhibition may be realized by reducing the agency cost;(3)Property rights and financing constraints play a regulatory role,and high financing constraints and private enterprises have a more significant inhibitory effect.The above research shows that equity incentive should play a weakening role in executives’ self-interest financial behavior;Comprehensively consider the heterogeneity characteristics of enterprises and improve the suitability,accuracy and effectiveness of equity incentive scheme design;Make good use of the mechanism or tool of management equity incentive,give full play to the governance ability of equity incentive,reduce enterprise agency cost and promote the healthy development of entity enterprises.