Research On Incentive Scheme And Effect Of Repurchased Restricted Stock

Since the split-share reform in 2005,the laws and regulations related to stock incentives have been increasingly improved in China and the stock incentives of Chinese enterprises have coming to a new stage.Moreover,China’s share repurchase institution has adopted a relatively strict legislative model of the general prohibition and limited exception for a long time.It has undergone two revisions in 2005 and2018,which clearly proposed that listed companies could choose to repurchase their own shares for stock incentives.Under the guidance of the policy,more and more listed companies began to repurchase shares for the stock incentive arrangements,among which more companies choose restricted stocks.Repurchased restricted stock incentive is a kind of stock incentives that combines share repurchase and restricted stock incentives.Compared with traditional private placements of equity,it is distinctive for avoiding dilution of earnings per share,signal transmission mechanism,independent pricing,etc.In recent years,among the A-share listed companies that have implemented repurchased restricted stock incentives,companies belonging to biomedical industry are in the forefront.Kelun Pharmaceutical has carried out repurchased restricted stock incentives for three times since 2016 with masses of data accumulation,which is representative and feasible.Therefore,this paper chooses Kelun Pharmaceutical for case study.Based on a series of theory and literature review,this paper analyzes the rationality and effectiveness of repurchased restricted stock incentives of Kelun Pharmaceutical.First of all,through discussion of contract elements from five aspects,it is found that the repurchased restricted stock incentives have certain rationality on the whole.Then,the share-repurchase regression results by the event study method with CAR model show positive market effects in short-term.However,there are information disclosure in advance and other negative events’ noise impact.In addition,this paper analyzes the long-term performance of enterprises using financial indicators,non-financial indicators and buy-and-hold abnormal returns,by comparing with average value of the whole industry and companies without stock incentives.The study found that the agency cost of Kelun Pharmaceutical decreased significantly and played a part of the intermediary effect.Except to the long-term solvency needed to be improved,the company’s profitability,development ability,innovation ability and employee mobility have been promoted in recent years.And the positive effect of stock incentives is still significant in long-term.As of February15,2023,the total market value of Kelun Pharmaceutical has ranked the top fourth in the chemical preparation industry.Finally,summarize the experience and shortcomings.Innovation-driven pharmaceutical companies could try repurchased stock incentives during the period of low stock price.At the same time,pay attention to the risk of information disclosure and market manipulation.The condition of executive should be scientific and diversified,so as to fully exploit the dualperformance of incentives and constraints.