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<p>With the complexity of the financial market, the widely used classical equity incentive program(C-EIP) is facing the dilemma of incompatibility between “incentive income” and “value creation” due to the establishment of the exercise price(EP) which has not been adapted to the complexity of the financial market, resulting in a lack of ability to solve the proxy conflict of the enterprise. For this reason, under the constraints of the typical fact that financial markets are characterized by fractal features, we construct a “fractal exercise price(F-EP)” based on the fractal market hypothesis(FMH). At the same time, with the goal of narrowing the gap between “incentive income” and “value creation” and promoting the compatibility of the two, the “standard exercise price(S-EP)” is inverted to optimize the EIP. It is found that the “F-EP” can incorporate the changes in corporate value creation into the changes in executive incentive income, and ultimately play the role of “golden handcuffs” of EIP effectively. We promote the integration of FMH and corporate decision-making theory, realizing another pricing mechanism of the EP in the EIP, and also providing a reference for enterprises to formulate reasonable EIP.</p>

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Exercise Price and Corporate Principal-agent Conflict: Optimizing Equity Incentive Programs Under Fractal Markets

  • 期刊论文

  • 发表日期：

    2026年2月19日

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  • Xu Wu,
  • Ju Zhou,
  • Yuerong Hu,
  • Yiting Zhao

摘要

With the complexity of the financial market, the widely used classical equity incentive program(C-EIP) is facing the dilemma of incompatibility between “incentive income” and “value creation” due to the establishment of the exercise price(EP) which has not been adapted to the complexity of the financial market, resulting in a lack of ability to solve the proxy conflict of the enterprise. For this reason, under the constraints of the typical fact that financial markets are characterized by fractal features, we construct a “fractal exercise price(F-EP)” based on the fractal market hypothesis(FMH). At the same time, with the goal of narrowing the gap between “incentive income” and “value creation” and promoting the compatibility of the two, the “standard exercise price(S-EP)” is inverted to optimize the EIP. It is found that the “F-EP” can incorporate the changes in corporate value creation into the changes in executive incentive income, and ultimately play the role of “golden handcuffs” of EIP effectively. We promote the integration of FMH and corporate decision-making theory, realizing another pricing mechanism of the EP in the EIP, and also providing a reference for enterprises to formulate reasonable EIP.