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Relationship management equity incentive , equity structure and corporate performance

Author: ShenHaiBing
Tutor: HouLiQiang
School: Fudan University
Course: World economy
Keywords: management equity incentive share structure degree of ownership concentration degree of equity restriction corporate performance
CLC: F276.6;F224
Type: Master's thesis
Year: 2011
Downloads: 358
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Abstract


Since the second half of 2005, listed companies in China have begun to split share structure reform. Along with the gradual improvement of relevant laws and regulations, many listed companies have launched equity incentive plans. Though some equity incentive plans have promoted corporate performance, but some programs have obvious tendency of welfare, some even have become tools for transfer of benefits. There are also many incentive programs which have not been eventually implemented. The effectiveness of management equity incentive has been one of the hot issues in academic circle at home and abroad, but the findings have considerable differences. In these circumstances, a systematic study of the effects of equity incentive plans after the split share structure reform is very meaningful.Firstly, we put forward the hypothesis by theoretical analysis. In our opinion, an important reason for controversy on equity incentive effectiveness is the lack of knowledge of special ownership structure, in particular, the influence of ownership structure on the marginal effect of equity incentive plans. Our paper selects a sample of high-tech companies which were listed before December 31,2004 and tries to study the validity of management equity incentive by introducing cross terms using the 2006-2009 annual report data as panel data. By multiple linear regression model, we obtain several conclusions. Firstly, management equity incentive of high-tech enterprises can promote the improvement of corporate performance. Secondly, compared with state-controlled companies, the marginal effect of management equity incentive in non-state-controlled companies is better. Thirdly, the level of ownership concentration doesn’t significantly affect the marginal effect of management equity incentive. Finally, the degree of equity restriction is positive related with the effect of management equity incentive.According to the above conclusions, the paper proposes several policy recommendations. Firstly, the government should adopt policies to encourage high-tech enterprise equity incentive plans and raise the proportion of equity incentive. Secondly, state-owned high-tech enterprises can improve company performance by the introduction of outside investors because it can raise degree of equity restriction. Thirdly, equity incentive target should not only include the core managerial and technical staff, but also should include directors and supervisors who have major business decision-making power. Finally, certain organization can made certain requirements about access conditions for the implementation of equity incentive plans. For instance, asset size, asset-liability ratio and the historical growth of company size can be used as evaluation indicators

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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