Equity Incentives, Agency Costs and Firm Performance-Based on Data from Listed A-Share Manufacturing Companies

DOI: https://doi.org/10.62517/jbm.202409405

Author(s)

Wenke Kong*, Liezhi Shen

Affiliation(s)

School of Business Administration, University of Science and Technology Liaoning, Anshan, Liaoning, China *Corresponding Author.

Abstract

This paper examines the dual principal-agent problem, using A-share manufacturing listed companies as the object of study. It integrates equity incentives, agency costs, and corporate performance into a unified analytical framework, and establishes a mediation effect model of equity incentives, agency costs, and corporate performance in listed companies. Selected panel data of manufacturing industry listed companies on the main boards of the China SSE and SZSE from 2018 to 2022 were empirically examined to assess the impact of equity incentives on corporate performance and agency costs. The mediating role of agency costs in the relationship between equity incentives and corporate performance was also analyzed. It has been discovered that equity incentives significantly improve company performance and effectively suppress Type I agency costs. However, the governance effect on Type II agency issues is not significant. Type I agency costs play a fully mediating role between equity incentives and company performance, whereby equity incentives improve company performance by suppressing the path of Type I agency costs, whilst Type II agency costs do not significantly affect it.

Keywords

Equity Incentives; First Type of Agency Costs; Second Type of Agency Costs; Firm Performance; Dual Principal-Agent; Intermediary Effect

References

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