Study On Equity Incentives Of ST Companies

An important feature of modern enterprises is the separation of ownership and management,but this separation makes information asymmetry between shareholders and management unavoidable and agency costs for the enterprise unavoidable.Equity incentives,on the other hand,can closely link the personal interests of the company’s management with the long-term interests of shareholders,helping to address the side effects of the separation of the two powers.Therefore,many listed companies in China have started to implement equity incentive plans in recent years,including some ST companies.However,ST companies often have operating crises,and the feasibility of equity incentives under such circumstances remains to be explored.Therefore,this paper selects *ST Tianyu as the subject of the study,and further explores the scheme design and implementation effect of the implementation of equity incentives in ST companies through an in-depth study of their equity incentive system.Based on the literature research method,case study method and event study method,this paper conducts a comparative analysis on the motivation,scheme and implementation effect of this equity incentive of *ST Tianyu.Firstly,based on the business situation of *ST Tianyu and the literature analysis,this study concludes that the motives for implementing the equity incentive of *ST Tianyu include eliminating the risk of delisting,binding core employees and reducing agency costs.Secondly,the paper compares and analyses the incentive schemes of *ST Tianyu from the perspective of equity incentive elements and finds that the equity incentive model chosen by *ST Tianyu is reasonable,but there are deficiencies in the scope of incentive,exercise arrangement and the setting of exercise conditions,which make the equity incentive not fully effective in the long term.Finally,the paper analyzed the effect of the implementation of *ST Tianyu’s equity incentive in three dimensions,namely financial performance,non-financial performance and market response,and concluded that the implementation of equity incentive by *ST Tianyu had improved the financial performance of the enterprise in the short term,but due to the shortcomings of the design of the equity incentive scheme,the equity incentive could not produce long-term incentive effect and did not produce significant incentive effect on the non-financial performance of the enterprise.In this case study,through the analysis of the equity incentive system of *ST Tianyu,the following conclusions were reached: *ST Tianyu’s choice of the stock option model was reasonable,but the intensity of the equity incentive was not strong enough,and there was a clear focus on the selection of incentive targets and the allocation of shares,which weakened the incentive effect on non-management employees,and the shortcomings in the design of the scheme made the long and short-term incentive effects of the equity incentive unbalanced.The shortcomings in the design of the scheme make the long-term and short-term incentive effects unbalanced.Based on the above analysis and conclusions,we suggest insights for the implementation of equity incentives in ST companies.