The Impact Of Equity Incentive On Corporate Performance From The Perspective Of Life Cycle

Due to the separation of ownership and management rights of contemporary companies,the problem of entrusted agency is common in modern companies,and one of the key issues in corporate governance research is how to effectively alleviate the conflicts and differences between custodians and shareholders.In December 2005,the China Securities Regulatory Commission promulgated the Administrative Measures for Equity Incentives for Listed Enterprises(for Trial Implementation),which for the first time required the objectives and sources of equity incentives,marking the formal implementation of equity incentives in China.After the adoption of the pilot measures,the regulatory authorities further improved the equity incentive system,and the relevant equity incentive measures for state-owned enterprises were introduced,which formulated rules and guidance for Chinese enterprises to successfully implement equity incentives.According to statistics,between 2006 and 2020,a total of 1,716 listed companies implemented equity incentive plans in China’s A-share market,accounting for more than 40% of A-share listed companies.Equity incentives occupy an important position in the management methods of listed enterprises in China,and have received sufficient attention in the current mixed ownership reform of state-owned enterprises.Although equity incentives have been studied in China for more than 20 years,there are still many companies that have failed to significantly improve their performance after implementing equity incentives.In fact,the performance of an enterprise is inseparable from its own stage of development,so the life cycle stage of the enterprise should become a key factor when designing equity incentive policies.This paper selects Company E,a listed company,which developed from the growth stage to the mature stage from 2011 to 2020 and implemented three consecutive equity incentives.The research content of this paper is the three equity incentive plans implemented by Company E during the growth and maturity periods,and innovatively selects financial and non-financial indicators related to the life cycle,analyzes the impact of equity incentives on the company’s performance in different life cycle stages of Company E,and also refers to the changes in the same industry for comprehensive analysis.It is found that the equity incentive effect of Company E in the growth and mature period has a certain role in non-financial performance,but the improvement effect in financial performance is not significant,and on the whole,the equity incentive does not achieve the expected effect.Regarding the reasons why the equity incentive plan of Company E did not achieve the expected results,this paper believes that there are objective and subjective factors,and then this paper puts forward relevant suggestions from the perspective of life cycle: enterprises should set corresponding performance evaluation indicators according to the different characteristics of the growth period and maturity period,select different implementation plans for equity incentives,and reasonably control the intensity and validity period of equity incentives.