Abstract
Though the equity incentive plan was introduced into China just for a short time, the number of listed companies that implemented equity incentive plan was growing fast. In order to improve the effect of equity incentive plan on alleviating agent problem between the owners and managers, China Securities Regulatory Commission supports it by the developing the legislation and prefer-ential tax policies. In China, it is a general phenomenon of major shareholders’ tunneling behavior. However, there is little research focusing on the relationship between tunneling behavior and equity incentive plan. This paper mainly researched the effect of major shareholders’ tunneling behavior on the preference of equity incentive plan, using cross-sectional data of A-share listed companies in China security market from 2006 to 2013. Actually, the empirical result showed that, the major shareholders’ tunneling behavior has a negative effect on equity incentive plan. The major shareholders’ tunneling behavior affects the welfare tendency of equity incentive plan, and the companies with serious major shareholders’ tunneling behavior are more likely to choose the welfare-tendency equity incentive plan.
Highlights
The issue of “The Equity Incentive Regulation of listed company” published in December of 2005 has set a standard for regulating the equity incentive plan of listed companies
Based on the China’s A-share market, we studied the relationship between the large shareholder’ tunneling behavior and the equity incentive strategy
This paper get a conclusion about the tunneling of large shareholders and equity incentive strategy by using the A-share listed companies implemented equity incentive plan in China from 2006 to 2013 as the research sample
Summary
The issue of “The Equity Incentive Regulation of listed company” published in December of 2005 has set a standard for regulating the equity incentive plan of listed companies. Government has promulgated many policies, and the number of companies who have implemented equity-based incentives plan increases rapidly. (2016) The Impact of Tunneling Behavior on Equity Incentive Plan. The equity incentive plan cannot achieve these aims by establishing the profit and risk sharing mechanisms between the owner and the manager. In 2012 Jiayu Shares (300117) launched the first equity incentive plan with an exercise condition on the base of the net profit of previous year, and before the announcement of formal periodical financial reports. We constituted an index to evaluate the welfare tendency of the equity incentive plan and severity of the large shareholders’ tunneling. We explored how the large shareholders’ tunneling affected the welfare tendency of the equity incentive plan by building an order-probit model. We studied the consequence of welfare-tendency equity incentive plan on the corporation governance and put forward some feasible improvement suggestion of equity incentive plan
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