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An empirical analysis of the listed company equity incentives affect the value of the company

Author: TangXianJie WangHuaiTing From: www.yourpaper.net Posted: 2010-03-24 05:57:11 Read:
Abstract: To establish a sound management Stock Incentive mechanism is one important way to deepen the reform of state-owned enterprises and enhance the vitality of enterprises, the operator holding national shareholders (state capital injection of shareholding) and tradable shareholders (small shareholders) different equity incentive effect. Operator holding the strongest incentive will help to improve the company's performance and enhance the value of the company; prone investors are the main problem of the lack of protection mechanisms commissioned agency relationship under the state-owned capital, and then expand the distance as well as the information of the agency relationship The degree of asymmetry lead to inefficient enterprises; in the tradable shareholders incentive environment, the the equity liquidity separatist fundamentally damage the consistency between the interests of the shareholders of the listed company, may lead to the Ownership and incentives of the state shares weakened. Select manufacturing machinery, equipment, instrumentation, sub-categories listed companies on the basis of summing up the results of previous studies, the study sample, the exploration of these issues from an empirical perspective.
Keywords: operators; equity incentive; company value

Abstract: Establishing and perfecting the enterprise operator option motivation mechanism is one of the important ways that deepen the reform of state-owned enterprise and enhance the vitality of enterprise. The state-owned shareholder (holding state-owned capital injection) and the circulation stock shareholder (medium and small shareholder-owned stock) have different effects of stock option motivation in the operator-owned stock. And, the operator-owned stock has the strongest motivated function, and is advantageous to improve the enterprise achievements and promote the enterprise value ; state-owned capital under the principal-agent relationship is easy to present the question which investors lack the protection mechanism, expanding the distance of principal-agent relationship and the degree of information asymmetrical, and causing the low enterprise efficiency; under the environment of circulation stock shareholder motivation, the split of stock option fluidity has fundamentally harmed the uniform benefit among shareholders of listed companies, possibly weakening the motivation of the operator-owned stock and state-owned stock. On the basis of previous research, this paper sums up the results, chooses the machinery, equipment and measuring appliance of manufacturing industry of listed companies as the research samples, explores the above issues from the empirical point of view, and draws the conclusion.
Key words: operator; stock option motivation; enterprise value

Modern property rights system phase separation of ownership and management to become the most basic features of the enterprise, to shareholders from a sense of ownership generally showed residual claim, operators with own expertise and management information, control enterprise the control rights. Mature capital markets in Europe and the United States and other equity incentive and corporate value associated enterprise management embodies incentives and an important way to solve the problem of the separation of ownership and Equity incentives to promote business with shareholders to form a common and consistent interest, known as "golden handcuffs" corporate incentive.
With the successful advance of China's split share reform, capital markets profound changes occurred in the institutional level, but is still in the process of gradually improve, each listed company also actively explore the work of the senior management equity incentive to stimulate the enthusiasm of and creativity. SFC listed company equity incentive Standard Opinion announcement also reflects the support of the government departments of the equity incentive plan, but aroused the concern of the investors in the equity incentive plan. Split share structure reform, incentives change from a static target to the dynamic target of non-tradable shares of shareholders of the stock can be listed negotiable, its premium income can be achieved and the interests of the state-owned shares shareholders also will be subject to share price volatility, and trend consistent with the interests of the holders of tradable shares. Therefore, the value of the company gradually achieve a market-oriented, major shareholders and the interests of minority shareholders gradually overlap, which would improve the corporate governance structure, play a very important role in enhancing the value of listed companies.
The largest shareholder driven by the interests will be better supervision and incentive motivation, and be in full force and effect play. At this point, the listed company management incentive is no longer a formal arrangement; small shareholders also have certain powers, can participate in the governance of the company. The interests of the investors and the management equity incentive linked to the management also has the ownership of the company, thus greatly mobilized the enthusiasm and creativity of the management, preservation and appreciation of themselves and their shareholders' wealth, promote China's capital market micro main internal incentives strengthen internal health improvement and "internal control" phenomenon of elimination, the company became the true meaning of market players, and through market competition and development of mature, step by step. Implementation of equity incentive is not only associated with the property rights of the company's relationship with other legal, regulatory and other aspects also need to have a sound market mechanism. Not yet mature domestic external market environment, the management Stock Incentive whether significant performance, with the value of the company in the end what kind of relationship? Issue of this series remains to be tested. Select manufacturing machinery, equipment, instrumentation, sub-categories listed companies on the basis of summing up the results of previous studies for the study sample, the exploration of these issues from an empirical perspective, concluded.

A review of the literature

(A) Foreign Literature Review
From empirical research perspective, foreign scholars have different views on management equity incentive effect, representative view of the following four categories:
A significant incentive effects. Jensen and Meckling (1976) in its groundbreaking essays on agency costs "Theory of the Firm: manager behavior, agency costs and ownership structure", from the angle of the exogeneity study operators of equity and enterprise value between the operator holding effective reduce the agency costs the operators of equity and enterprise value positively correlated. Hall and Liebman (1998) that the remuneration and corporate performance of the operators of a strong correlation, has a strong incentive stock options, increase the proportion of stock options, in the remuneration structure of the operators operators pay and corporate performance increased significantly.
No significant incentive effects. Jensen and Murphy (1990), using the regression estimated cash compensation, options, incentives generated by the internal stock program and dismissed the threat, concluded: large public shareholding enterprise performance and managerial compensation weak correlation sex. Rosen (1992) concluded, on managerial compensation empirical analysis of managerial compensation to stock returns between 0.10-0.20 flexibility, that is, the stock yields rose from 10% to 20%, the enterprise manager remuneration will increase 1 %. Holderness and Sheehan (1988) and Loderer and Martin (1997), studies have shown no correlation between business valuation and ownership structure. The results of the study show that the remuneration of the operators showed significant incentive effects on corporate performance.
Interval incentive effect. The third representative view, the stake with the executives to improve enterprise performance will produce two completely opposite effect: a convergence of interests effect and Tunneling effect. The convergence of interests effect is the shareholding will make the interests of executives with the interests of shareholders in line, there is a continued positive relationship with the enterprise value of the stake within; Tunneling Effect is If this ratio exceeds a certain range, the supervision of the capital market and the incentive effect becomes weak, will be a negative correlation between the results of the stake.
Morck (1988) Tobin's Q value, the ownership percentage of the members of the Board as the corporate performance, holdings of managers measure of empirical research results show that the shareholding ratio in the range of 0-5%, Tobin's Q value of directors The positive correlation; stake in the range of 5% to 25%, the proportion of Tobin's Q value of directors' shareholdings are negatively correlated; over 25% of both positively correlated. Further, when the stake between 0-5% and greater than 25%, a convergence of interests effect is greater than the interests of the occupation of effect between 5% -25%, which is greater than the former. McConnel and Servaes stake of Tobin's Q and manager, relationship manager stake square linear regression analysis found a significant positive correlation Tobin's Q value manager shareholding ratio in the range of 0-50%, with the manager held The square of the proportion of shares significant negative correlation. Stulz (1988) model proved to enterprise performance initially increased with increasing stake operators, and then begin to decline. The reason is the increase in the equity of the operators have power boosting shareholder monitoring, but may also hinder corporate control market mechanisms effectively, thereby reducing performance.
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