Research on the impact of equity incentive model on enterprise performance: A mediating effect analysis based on executive entrepreneurship

Abstract

In implementing the equity incentive system, this paper delves into the listed enterprises’ selection of equity incentive models. While previous research has extensively covered the effects, models, and influencing factors of equity incentives, there needs to be more in-depth literature focusing on the diverse incentive models and their impact on corporate performance. Notably, there needs to be more literature on considering entrepreneurial spirit as a mechanism. It aims to explore the relationship between executives’ choices under different incentive models, the entrepreneurial spirit fostered by these models, and their combined impact on corporate performance. The findings reveal that adopting the restricted stock incentive model by listed enterprises implementing the equity incentive system significantly positively affects enterprise performance. Mechanistic tests show that when a company implements the restricted stock incentive model, executives prioritize maximizing their interests, leading them to embrace more risk in their investment decisions. This behavior, in turn, stimulates the adventurous spirit of executives, positively impacting enterprise performance, particularly pronounced in companies with more concentrated executive power. Moreover, executives may be more inclined to invest in high-risk, high-reward innovative projects, a behavior indicative of innovation and more prevalent in firms with higher research and development (R&D) investment. However, the limitation of this paper is that the study evaluates the operation of the equity incentive system in China by taking listed companies in China as an example, which is not necessarily suitable for foreign developed capitalist countries. This study contributes to the study of principal-agent problems by exploring the relationship between executives, entrepreneurship and firm performance.