Motives of Stock Option Incentive Design, Ownership, and Inefficient Investment

Sustainability

Ran An¹  Wei Shan² 

[1] Library, Renmin University of China, Beijing 100872, China;School of Economics and Management, Beihang University, Beijing 100191, China;

关键词: stock option incentive;    inefficient investment;    state-owned enterprises;    ownership;    abnormal return;   

DOI  :  10.3390/su10103484

来源: DOAJ

【 摘 要 】

This paper analyzes the effects of stock option incentives on inefficient investment. Specifically, based on the motive of design, we divide stock option incentives into incentive-driven and welfare-driven incentives. Our research is based on the panel data of 511 Chinese listed companies that declared stock option incentives from 2010 to 2014, including both incentive-driven and welfare-driven incentives. Our research shows that different types of stock option incentives have different effects on inefficient investment. Generally, incentive-driven stock option incentives reduce inefficient investment, whereas welfare-driven stock option incentives do not reduce inefficient investment, but increase it. However, there is a weakening effect in state-owned enterprises due to two opposite factors, numerous restrictions and more self-interested managers. Additionally, the paper provides implications that some stock options are manipulated by managers in the designing stage in order to pursue self-interests, and therefore monitoring abnormal share price movement and performance hurdles is important to safeguard the wealth of shareholders and promote effective motivation for managers.

【 授权许可】

Unknown