The Performance Target in Equity Incentive Contract & Corporate Investment

Abstract

The dissertation will examine the effect of equity incentive plans on company investment behavior from the perspective of performance target setting, as well as the possible influence of performance expectations on the relationship between these factors, by conducting an empirical test analysis of a large sample of data based on the selected research samples. According to the study, incentive performance goals can improve a company's investment scale and efficiency while inhibiting inefficient investments. Furthermore, if the company's future performance expectations are similar, the investment scale of new projects will be reduced, investment efficiency will be reduced, and target performance will be inhibited.The research conclusions of this dissertation support the optimal contract theory, which not only expands the relevant literature on performance-based equity incentive contracts, but also provides new evidence for research in the fields of equity incentives and corporate investment. Additionally, it has distinctive Chinese characteristics, which are significant for the improvement of Chinese listed companies' equity incentive systems. Key words: Equity incentive; Performance targets; Investment efficiency; Mediation effect.