The Impact of Equity Incentives on Corporate Governance and Performance

Abstract

As the modern enterprise system undergoes ongoing enhancements, equity incentives have evolved into a crucial motivational mechanism within companies. Nevertheless, the execution of equity incentives is not devoid of contentious issues. Some research indicates that the introduction of equity incentives can foster enhancements in corporate governance and overall performance. However, other studies contend that such incentives may also introduce adverse effects. This paper analyzes the positive impacts of equity incentives from three dimensions: corporate performance, corporate governance, and corporate business investment, and presents the problems of the equity incentive system. The findings suggest that equity incentives yield favorable effects on both corporate governance and performance. The significance of this research stems from its profound exploration into the repercussions of equity incentives on corporate governance and performance, offering substantial practical relevance. Moreover, it serves as a theoretical foundation, aiding enterprises in the development of well-founded and rational equity incentive programs.