Research On The Impact Of Equity Incentive On Enterprise Performance In Biomedical Industry

As a national strategic emerging industry,bio-pharmaceuticals are a sunrise industry that affects human health and well-being.2022 is a year of opportunities and challenges for the bio-pharmaceutical industry,with nine departments,including the Ministry of Industry and Information Technology,the Development and Reform Commission and the Health Care Commission,jointly issuing documents such as the "14th Five-Year Plan" for the development of the pharmaceutical industry,requiring bio-pharmaceutical companies to accelerate the pace of change to Innovation-driven transformation.This requires bio-pharmaceutical companies to improve their own expertise and absorb cutting-edge talents to provide a guarantee for their subsequent development.Equity incentives can help enterprises solve the problems arising from the separation of ownership and operation under the modern enterprise system and meet the urgent demand for core talents and expertise.At present,the scholars’ research on equity incentive is less combined with case companies to explore the specific path of incentive programs to influence corporate performance.Watson Bio,as a high-tech bio-pharmaceutical company specializing in human vaccines and other technologies,has been in the leading position in the industry and successfully implemented an equity incentive plan as early as 2018,which has certain significance.Therefore,this paper takes Watson Bio,a leading company in the bio-pharmaceutical industry,as a case study,and establishes a research framework by combing the literature and theories related to equity incentives to analyze the impact of equity incentive plans on corporate performance.The research includes: introducing the basic situation of Watson Bio and the content and implementation of the equity incentive program,then analyzing the impact of equity incentive on corporate performance in terms of both financial and non-financial performance from three major paths: principal-agent cost,R&D innovation investment and core competitiveness,and finally exploring the value brought by equity incentive to the company,pointing out the shortcomings of its program design,and drawing conclusions and recommendations for other companies that are going to be involved in equity incentive program.Finally,the paper explores the value of equity incentives for the company,points out the shortcomings of the program design,and draws conclusions and recommendations for other bio-pharmaceutical companies that will implement equity incentive programs.This paper selects the relevant indicators of Watson Bio before and after the equity incentive for the period of 2016 to 2021.The results of the study show that Watson Bio’s first equity incentive program has a positive contribution to corporate performance,in which the first category of agency costs,R&D innovation investment and core competitiveness all play a partial role in the impact of equity incentive to promote corporate performance,while the second category of agency costs does not play a significant contribution.However,the design and implementation of the equity incentive program reduces the incentive effect to a certain extent,which leads to the reduction of R&D investment,frequent executive departures and changes,and does not play a good role in attracting and retaining talents for the enterprise.