Research On Information Manipulation Mechanism In The Equity Incentive Process Of Listed Company

As an effective way to solve agent question and decrease the cost of agent, equity incentive has significantly improved the companies'core competition and boosted the development of economy in western countries. However, a series of financial scandals, namely Enron and Worldcom, make people have to reconsider the effects of equity incentive. The practice of equity incentive in western countries demonstrates that equity incentive is a"two-edged sword": it gets active effects of long-term incentive in suitable condition, otherwise, it brings with some new moral hazard and produces some negative effects such as information manipulation, namely Windowing Dressing, fabricating profits and false statements.In our country, it has become the consensus and policy orientation that using equity incentive to inspirit top managers in recent years. With the fall of non-tradable shares reform and related measures gradually forming, equity incentive has been received more and more focused. So, it is necessary to recognize the effects of equity incentive objectively in the time when the equity incentive plan will be implemented in a large scale. Currently, it is an urgent task to discuss top executives'information manipulation and right both in theory and practice field. The author hopes that these research results would supply useful thinking for Chinese listed companies which have implemented or will implement equity incentive plan to make appropriate plan and authorities to make reasonable policy.But so far there is not sufficient research on top managers'information manipulation in the process of equity incentive theoretically. Moreover, the literatures of how to prevent information manipulation triggered by equity incentive are extremely rare. And the little existing research was only in static perspective and assumed that the game partners were rational. Different from the existing research, on the basis of learning, summarizing and absorbing the foreign relevant achievement in the research field, combining with the reality of the listed company of our country, this paper focuses on the information manipulation mechanism during equity incentive enforcement, so as to show the effects of equity incentive. It is divided into seven parts altogether.The first part introduces the background and significant,method, contents, and architecture of the research; And defines the basic concept .Thus offers the theory foreshadowing and the analytical prerequisite for the following research. The second part is the review of related theory and literatures. In this part, principal-agent theory, residual claim theory and human capital theory are firstly introduced to strengthen understanding the necessity of equity incentive. Then the literatures about equity incentive and information manipulation are given a brief introduction, this provides research basis and background information to the following parts. At last, the author reviews the literatures which research the relationship between equity incentive and information disclosure.The third part is the status of equity incentive and information manipulation. In this part, the author discusses the status and issues of equity incentive and information manipulation in our country. Thus offers the practical background foreshadowing for the following parts.The fourth part is the static game analysis of information manipulation in the process of equity incentive. The author begins with extending the traditional principal-agent model, treating regulation as endogenous, constructs an equity incentive model including information manipulation and regulation to analyze that the factors how to influence equity incentive and information manipulation.The fifth part is the dynamic evolutionary game analysis of information manipulation in the process of equity incentive. The author analyzes the dynamic formation mechanism of information manipulation under the assumption that shareholder and manager are limited rational by using evolutionary game method. The research results provide a theoretical reference to avoid information manipulation triggered by equity incentive.The sixth part is the empirical research on equity incentive and information manipulation in our country. In this part, the author tests the relationship between equity incentive and information manipulation by using panel data model firstly, then tests the relationship between equity incentive and fraud by using the data of Chinese listed company.The last part is conclusion. In this part, the author summarize the conclusion of the above every part, put forward some policy suggestions and myself view on the limitation of the thesis and direction studied further in the future.The following contents are the main innovation points in this paper:â‘ An equity incentive model including information manipulation and endogenous monitor was constructed by extending traditional principal-agent model to analyze the relationship among equity incentive,information manipulation,monitor. The conclusions of this model would provide a theoretical reference for the listed companies which implement equity incentive when the capital market is not efficiency enough and the regulation mechanism needs to be improved.â‘¡Research on the mechanism of executive's information manipulation in dynamic perspective by using evolutionary game method. The existing research all assumed that shareholders and managers were full rational. But in fact, shareholders and managers are always limited rational. So to study the information manipulation mechanism with the assumption of limited rational is more connected with the actual and the conclusions are more useful.â‘¢Based on the data of Chinese listed company, this paper empirically tests the relationship between equity incentive and information manipulation. The results answer the questions that the implement of equity incentive plan reduced the agent cost or increase the agent cost for the first time.