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The Analysis and Research on Equity Ownership Incentive in Listed Companies

Author: ZhangXunYuan
Tutor: PanQingMu
School: Southwestern University of Finance and Economics
Course: Financial
Keywords: Corporate Governance Voluntary Disclosure CEO Duality Ownership concentration
CLC: F271
Type: Master's thesis
Year: 2009
Downloads: 325
Quote: 0
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Abstract


Human capital has now become the most active element to accelerate enterprises’growth in the era of knowledge economy. To make full use of human capital, it’s necessary to design an effective mechanism which can arouse owners’ initiative, among which the most outstanding innovation is the creation of equity ownership incentive. As a long-term mechanism of incentive and restrain, it’s blessed with following advantages: equity ownership incentive cut down agent costs, encourage employees to be more creative and enthusiastic, in addition, it provide an effective solution to the problem that senior executives excessively concern with their short-term interests, and guarantee the fulfillment of enterprise’s long-term goal.With the advancing of Economic restructuring, conflicts between principals and agents emerged. Most of our enterprises are SOEs, their shareholders’(principal) interest are in the hand of managers who act as agents. How can principals design an effective mechanism for incentive and restrain which can maximum agents’interest and at the same time maximum profits of the enterprise he or she serve.As an important mechanism for the modern enterprises, equity ownership incentive had been an extensive application in the western developed countries. In recent years, it had been accepted by some Chinese listed companies. Since 2005,China conducted the reform of Share Structure Division. At the end of 2006, 85 listed companies remaining failed in this reform among more than 1000 counterparts in both Shanghai and Shenzhen stock exchanges, indicating this reform basically was succeed. With the improvement of policy atmosphere for equity ownership incentive, the Management Measures of the listed companies’shares incentive“(for trial implementation) was issued by the SFC on January 6, 2006. It indeed provides great guidance for listed companies and their shareholders.Yet, looking at the outbreaks of financial counterfeiting in the U.S. listed companies, we gradually make sense that this mechanism is a blessing or curse, which deserve more comprehensive researches and reasonable improvements. Attaching great importance to the mechanism’s limitations, we have to correct ourselves so that we can establish a system which is Chinese characteristics and suitable for China. Consequently, it’s a meaningful topic.From the point view of this paper, equity ownership incentive becoming an important part of the modern theory of incentive has a certain historic inevitability. With the development of legislation, maturity of capital market and improvement of corporate governance, we are confident that it will play a more decisive role in the reform of SOEs and long-term incentive of their employees. At last, a conclusion is drew that we have to explore Chinese incentive system of equity ownership with method of dialectical logic.

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CLC: > Economic > Economic planning and management > Enterprise economy > Enterprise system
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