<p>This study examines the impact of equity incentive on inefficient investment based on the sample of Chinese listed companies of Shanghai stock market. I show that: both of over-investment and under-investment are existed among state-owned enterprises, the level of under-investment is worse than the level of over-investment, equity incentive is not that popular among state-owned enterprises; equity incentive can limit over-investment as well as under-investment significantly, so universality of equity incentive among state-owned enterprises needs to be improved.</p>