Positive Study On The Stock Option Incentive System And Earnings Management In The Listed Companies Of China

Ever since January 2006, some governmental organizations, such as the Ministry of Finance, National Resources Commission and China Securities Regulatory Commission, have issued a series of legal regulations which are related to stock option incentive system of listed companies. These regulations together have established a comprehensive system to supervise and guide the implementation of the stock option incentive system. Thus, the enthusiastic of the listed companies in China has been aroused. It has been proved by the modern enterprise theory and foreign practice that the stock option incentive system has great positive influence on the development of company through improving the management structure, reducing the agent cost, increasing the management efficiency and strengthening the cohesion and competitive ability of the company. However, we should still be aware that there also come several conflicts and problems with the implementing of the stock option incentive system, in which the earning management problem is a typical example.This is just a positive study about the earnings management problem coming with the implementation of the stock option incentive system. We firstly reviewed some related study, both domestic and foreign ones, and then we briefly analyzed the situation of the stock option incentive system in the listed companies of China. Finally, based on the effects of the stock option incentive system on the listed companies, we studied the possibilities of earnings management problem caused by the stock option incentive system from both theoretic and positive perspective. We took the listed companies who had issues the announcement about the stock option incentive system plans as our study sample and took their annual report and related announcements as the information resources. After careful selection, we finally got fifty-one effective sample companies. We made use of the SPSS13.0 statistic software to analyze the model that we constructed with several variables such as the incentive degree, manners and earnings management degree, by the way of multiple-key linear regression. The conclusion we eventually got is: In China, the stock option incentive system has some stimulation effect on the earning management behavior of the listed companies. The higher the incentive degree, the more obvious the earnings management tendency is. Besides, some key factors in the stock option incentive plans, such as the validity period of the incentive objects and the evaluation index, can also affect the earnings management behavior of the listed companies. This conclusion is of great help in revealing the earning management behavior of the listed companies and of great value in improving the stock option incentive system and strengthening the regulation of the listed companies, so as to protect the interests of the common investors.