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Abstract
Equity incentives are crucial for talent acquisition and fostering corporate innovation; yet, the current literature predominantly focuses on the business level, with less research on the correlation between equity incentives and the capital market. This study empirically investigates the influence of equity incentive schemes on capital market pricing efficiency, utilizing data from Chinese A-share listed businesses between 2010 and 2023, focusing on stock price synchronization and post-surplus announcement drift as analytical viewpoints. The findings indicate that the execution of corporate stock incentive plans can significantly enhance the price efficiency of capital markets. The mechanism test indicates that corporate stock incentive plans enhance the efficiency of capital market pricing. Regarding various incentive mechanisms, both stock options and restricted shares influence capital market pricing efficiency. However, when the share price approaches the exercise price (grant price), restricted shares adversely affect pricing efficiency, whereas stock options positively impact it. Subsequent research indicates that the beneficial impact of equity incentives on capital market pricing efficiency is more pronounced in enterprises with high stock price information content and in those where incentive recipients comprise key technical people. The study's results elucidate the theoretical debate over the practical effects of equity incentive schemes and offer recommendations on the appropriate types of equity incentives for various enterprises to enhance capital market pricing efficiency.
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