Equity Incentives and Firm Performance in China: Insights From the Corporate Life Cycle

This study explores the impact of equity incentive contractual terms on firm performance across different corporate life cycle stages in China. Drawing on panel data from Chinese A-share listed companies (2010–2023), this study empirically assesses how the implementation and structure of equity incentive plans, which include incentive intensity, recipient coverage, and the proportion allocated to key employees, affect firm performance. The findings indicate that the adoption of equity incentives, greater incentive intensity, broader recipient coverage, and a higher allocation to key employees are positively associated with improved firm performance. Moreover, when distinguished by corporate life cycle stages, the results reveal that the positive effects of the implementation of equity incentives, wider coverage, and greater allocation to key personnel are consistently significant across all stages, with the most pronounced impact observed during the growth stage. Notably, incentive intensity exerts a significantly positive effect on performance only during the growth phase.