The Dark Side of the Chinese Stock Market: Managerial Rent-Seeking through Equity Incentives

Li-jun Zhao and Zheng-wei Wang

International Journal of Economics and Finance, 2016, vol. 8, issue 4, 156-165

Abstract: Despite widespread attention, most previous papers have failed to test the real effects of equity-based compensation because of endogeneity. In this study, we collected data from the Chinese companies listed in the Shanghai and Shenzhen stock markets from 2006 to 2012. After controlling the problem of endogeneity and selection bias, the results show that equity incentives have no significant influence on improving firm performance. Moreover, these companies were more likely to propose an equity incentive plan when the executives expected that it would be easy to satisfy the vesting conditions. Based on these facts, equity incentives have become managerial rent-seeking for the executives in the Chinese stock market. This is certainly not fair for the investors in the stock market. This paper uses one new method to study the real effects of equity incentives and contributes to the research on the Chinese stock markets and their compensation structures.

Keywords: analysts¡¯ predictions; equity incentives; firm performance; managerial rent-seeking; two-stage ¡°treatment effect¡± model (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://ccsenet.org/journal/index.php/ijef/article/view/56635/31213 (application/pdf)
http://ccsenet.org/journal/index.php/ijef/article/view/56635 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:8:y:2016:i:4:p:156-165

Access Statistics for this article

More articles in International Journal of Economics and Finance from Canadian Center of Science and Education Contact information at EDIRC.
Bibliographic data for series maintained by Canadian Center of Science and Education ().