The Effects of Executive Equity Incentives and Their Different Modes on Sustainable Financial Growth

Against the backdrop of global attention to sustainable development, in-depth research on the relationship between executive equity incentives and sustainable financial growth holds significant theoretical and practical value. Based on agency theory, this paper utilizes a long-term sample of Chinese A-share listed companies from 2006 to 2023 and employs a combined research method of propensity score matching (PSM) and difference-in-differences (DID) to conduct theoretical analysis and empirical testing. Theoretical analysis shows that equity incentives promote sustainable financial growth in companies by aligning the residual control rights of executives with the residual claim rights, and that two mainstream modes of equity incentive differ in their effects due to distinct contractual arrangements for human capital and physical capital investment by executives. Empirical results indicate that executive equity incentive events have a significant positive effect on corporate sustainable financial growth, both in the short and long term. Among these, restricted stock exhibits a significantly better incentive effect than stock options, performing better in both intensity and duration of the incentive effect. This study expands the research perspective on executive incentives and corporate sustainability and provides critical insights and recommendations for corporate governance practices, policy-making, and academic research.