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Short-term Wealth Effect of listed companies equity incentive

Author: CuiMingHuiˇˇZhangBing From: www.yourpaper.net Posted: 2009-04-02 21:45:26 Read:


As can be seen from the figure, the form of restricted stock equity incentive CAR value is slow to change. CAR curve observed stock options can be seen in -2 days CAR = 0.0044, and in the event date becomes 0.045, the stock price growth is very obvious. This shows that the effect of the increase in shareholder wealth in the short-term incentives in the form of stock options, restricted stock, the market is more recognized. (C) the proportion of sub-samples
The proportion of the total share capital of incentive stock options, the SFC and the SASAC provisions, the total number of the underlying stock listed companies all involved in the equity incentive plan may not exceed 10% of the total share capital of the Company. In actual operation, each listed company also developed according to the actual situation of the equity incentive program. In theory, we believe that a higher proportion of incentive means that operators and shareholders because of the convergence of interests, so more closely linked, the two sides agree more. But in fact the case? Take the median 4.96%, we are going to study the equity incentive stock to total equity ratio of different shareholder wealth increases and decreases.
As can be seen from the above table results -1 day before, two CAR curves are very close, and are approximately 0, the two curves have an elevated from day -1, and to enhance substantially the same amplitude. This shows that the equity incentive stock accounted for the proportion of the total number of shares, the stock price changes caused by almost the same. This is inconsistent with the point of view of Morgan and Poulsen. They accounted for an aggregate of 5% of the cut-off point to the number of incentive stock and found that incentive is less than 5% of the company's share price significantly positive improvement, and less than 5% of the company's share price did not change significantly. Thus, they believe that shareholder wealth will gradually increase when the incentive proportion of the company gradually increasing the total number of shares from 0. But when it reaches a certain point, the share price falling instead of rising. When reached a certain point, shareholders increased depending on the proportion of negative factors. The conclusion of our study is different. Select several other cut-off point to re-do the CAR diagram, there have been the same result.
(D) the sub-sample of the different growth
Zhou Jianbo, SunJusheng, (2003), for companies with high growth opportunities, to improve the operator's stake, give operators to provide higher incentives to work hard and strive to improve the company's operating performance and enterprise value. The opportunity for growth equity incentive effect is not obvious. Based on net asset growth for the total sample of listed companies in the last three years to measure the company's growth. Forms of incentives have a greater influence on the results, so we study the different forms of incentives. However, because of insufficient sample of restricted stock, so we only take samples of incentive stock options. 0.08305 take the median cut-off point to study the short-term wealth effect of the different growth sub-sample.
Shown above, take the form of incentive stock options in the company, the growth of the company arising from its equity incentive price changes is not close to 0, only a slight change in the event date. For high-growth companies, in the event prior to the date of its share price had a significant change, close to the peak in the event date. Consistent findings with Zhou JB SunJusheng,. The reason for this phenomenon is that many listed companies the implementation of incentive stock options, incentive stock options listed companies, the incentive target benefit they received directly depend on the future market price and the option price difference between, growth is relatively stable mature companies, the value and attractiveness of the options is relatively low, the benefits for high-growth companies, stock options the incentive objects are also better able to work for the company, creating benefits for shareholders. While generally optimistic about the company's growth, but also recognized equity incentive linked to the interests of both sides. By analyzing this phenomenon, we believe that equity incentives, especially stock options, there are some limitations in its scope of application. The characteristics of the enterprises listed companies in the design of long-term incentives for business to note that is not suitable for the use of incentive stock options.
(E) sound test
Taking into account the the CAR significant changes in event study may be caused by some sub-sample of CAR significant change, we do each sub-sample CAR figure out the conclusions greater impact on the sub-sample of six re-do entry test.
The results found not excluding individual extreme impact on the conclusions. Therefore, we believe that the conclusion is robust.

V. CONCLUSIONS AND ANALYSIS

From the above analysis, we can get the following conclusions: (1) Overall, the market reaction equity incentive activities, before and after the company announced price significantly improved short-term increase in shareholder wealth. (2) for different forms of equity incentives, the stimulating effect of stock options on stock price is greater than the restricted stock, the market is more recognized this form of incentives. (3) stock incentive plan involved the total number of shares of the total share of the share capital on the stock price change has little effect on the secondary market is more concerned about the existence of the incentive plan, the share of the total share capital As for the incentive stock does not give too much attention. (4) shareholders wealth effect in the growth performance of the Company is also different. Company for growth, little increase in shareholders' short-term wealth. For high-growth companies showed obvious wealth effect. Therefore, listed companies in the design of long-term incentives for business to be noted that the characteristics of the enterprise is not suitable incentive stock options.
Equity incentive management incentives, stock prices reflected driven by the business performance. This incentive to improve the corporate governance structure, improve the company's constraint mechanism is beneficial. The same time, it can mobilize the enthusiasm of the operators, the interests of the company and the interests of the individual and sustained higher returns for our shareholders. But in our imperfect oversight mechanisms, it is difficult to rule out the management fraud to obtain the possibility of incentives. This will not only cause damage to the long-term development of the company, will seriously damage the interests of investors. We can not deny the advantages of incentive stock options, but also need to pay attention to its drawbacks, not because someone loopholes negate the entire policy, but also can not be considered, with the system deregulation. Only from the system to be improved in order to make equity incentive to play its due role.
Of course, the Equity Incentive as a long-term incentives, the wealth effect caused by the long run should be, but because since 2006 the SFC and the SASAC issued shares of listed companies incentives of specification the implementation of equity incentive companies the number of samples is relatively small , not a long time, It is difficult to study the effect of the implementation of equity incentive plan in the long term. The short term, with the aim of basic research for incentive stock options, hope to start a discussion.

References:
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