An Empirical Study On Earnings Management Of Stock Incentives In Listed Companies And Its Influential Factors

Since the Listed Company Stockholder’s rights policing method wasissued in2006, stock incentives have been gradually implemented by moreand more listed companies. But many papers discovered that the earningsmanagement followed the stock incentives. This paper has studied the data ofall A-share listed companies which using stock-based incentives from2006to2011by the multiple linear regression. This paper compares the earningsmanagement level of the stock incentive companies between the previousperiod and following period of the two time points which are performanceevaluation starting date and exercise date. In terms of the influential factors,the three factors used in this paper are stock incentive mode, exercise periodand earning indexes which are specialized in stock incentive plan.This paper found the following results. During the first performance evaluation year, the earnings managements are positively related to shareoptions. And this relationship is statistically insignificant before theperformance evaluation period with the same companies. The share optionsand the restricted stocks which are wildly used in stock incentives are allsignificantly positive related to earnings management during the performanceevaluation period. Besides, the restricted stocks are also significantly relatedto the negative earnings management before the performance evaluationperiod. In terms of the influential factors, the earnings managements arenegatively related to the adoptions of various earning indexes such as profitanalysis index, growth index and non-classical index. Besides, the longexercise period makes the earnings management difficult and especiallyrestrains the earnings management in the later phase.This paper discusses the relationship of stock incentives and earningsmanagement through the empirical study, in order to analyze the long termefficiency of the stock incentives and make some suggestions for theregulator. On the other hand, this paper analyzes the effects of three factorson the earnings management which are stock incentive mode, exercise periodand earning indexes, in order to make an advice on the improvements of thestock incentive designs.