The Effect Of Equity Incentive On Accounting Reliability

With the carry out of《listed companies equity incentive management (Trial)》in2005、《Accounting Standards for Enterprises No.11-Share-based Payment》and a series of related policies, as well as the gradual improvement of economy after the2008financial crisis, more and more Chinese listed companies are bringing equity incentive plans into force. But at the same time, equity incentives in our country are not yet mature and there are many problems. A series of financial fraud in listed companies such as Mansions, Silver, Red Industrial and Chongqing Industrial has occurred. Although the listed company’s financial fraud scandal is not entirely caused by equity incentives, but we must also recognize that the long-term incentives, while vigorously advocating equity incentive, we must take into account their possible adverse effects. Only we have a full understanding of its possible negative effects and avoid weaknesses, can incentive stock options really play an active role in encouraging stuff.In this paper, qualitative analysis, statistical analysis and regression analysis are combined to explore China’s listed companies in the implementation of equity incentive impact on the earnings management. Firstly, I describe the statistical analysis of the key elements of the equity incentive program implemented by the listed companies in China, and then from the angles of equity incentives、equity incentives and earnings management I go on theoretical analysis, and thus I made the study assumes that in the implementation of incentive stock options in listed companies, the relationship between the degree of implementation of incentive stock options and carryout of earnings management of listed companies is positive.In the empirical analysis section, the sample is2006to2011Shanghai and Shenzhen stock exchange non-financial listed companies in the formal implementation of the listed companies of executive stock options and restricted stock plan, a total of59. Data is from the WIND database and manually collected from the announcement of the annual report of public disclosure of listed companies and equity incentive. In the study design, I use handling the cross-sectional Jones model accruals to measure the extent of earnings management, and as the explanatory variables, the company’s equity incentive levels as explanatory variables. Equity incentive level of implementation of the introduction of the value of equity and options held by company executives measures the degree of incentive stock options, according to executive shareholdings and options accounted for the proportion of total remuneration of executives. The regression results show that the degree of implementation of incentive stock options in listed companies and companies to manage earnings is positively related to equity incentive.The innovation of this paper is the measure of the degree of equity incentive model includes not only the value of the executives of the company’s shares held by the management, but also the introduction of the value of executive stock options and restricted stock. The model also introduces the incentive nature of this variable, according to the nature of the equity incentive plan for "stimulating" or "selfish" to describe the impact of earnings management in the process of equity incentive. The results show that, although the degree of incentive stock options will induce managers to increase earnings management, but with the increasingly high degree of manager incentives, the impact of equity incentives on earnings management will be weakened, the effect of management equity incentive on earnings management will gradually decline.