The Study On The Opportunistic Timing Behavior In The Equity Incentive

Since the reform of equity incentive in2006, more and more listed companies have introducted equity incentives gradually, to reduce the agency costs arisesed from y between the shareholders and managers. However, the equity incentive is a double-edged sword according to foreign theory and practice. On the one hand, it plays the long-term incentive effect to reduce the agency costs, on the other hand, it maybe cause the managers to do opportunistic behavior. In addition to regular opportunistic behaviors triggered by the equity incentive such as the earnings management and manipulation of information disclosure, it also includes opportunistic timing behavior such as the selection of favors time to announce the equity incentive program. In China, securities market is far from being reached mature and the listed companies’governance mechanisms are unsound both create the conditions for the companies’managers to have opportunistic behavior. Whether there is opportunistic timing behavior when launch the equity incentive program of listed companies in China? If really exist, what kinds of factors will affect the opportunistic timing behavior? These are the purposes of this study.We take the402equity incentive plans announced by the listed companies in China between July1,2005and February15,2012as the sample to empirical test the existence of opportunistic timing behavior in the equity incentive programs. We collect and calculate the30days’,31to60days’and61to90days’mean closing prices of the stock before announce of the plan. We determine whether there are opportunistic timing behaviors by the following standard:the possibility of the exercise price is lower than the higher one between the closing price and the30days’average closing price before announce the plan, the possibility of the30days’mean closing prices before announce of the plan is lower than the31to60days’and61to90days’mean closing prices before announce of the plan, the relative position of the closing price before announce of the plan, the closing price when announce the plan and the initial exercise price in in a specific interval.The results show that75.33%of the exercise prices aren’t higher than the higher one between the closing price and the30days’ average closing price before announce the plans,55.75%of the30days’mean closing prices are lower than the31to60days’ mean closing prices and64.05%of the30days’mean closing prices are lower than the61to90days’ mean closing prices,46.02%of the closing prices before announce of the plans are in the relative low position(lss than50%)of the30days’ closing prices before announce the plans. We also find that there are significantly39.05%,52.50%,56.46%and59.73%of the closing prices when announce the plans are in the relative low position of30days’,60days’,90days’ and180days’closing prices before announce the plans,54.38%of the exercise prices are in the relative low position of the30days’ closing prices before announce the plans. These all show that there is opportunistic timing behavior when the listed company develop an equity incentive plan in China.At the same time, we take the degree of opportunistic timing behavior as the dependent variable, which numerically equal to1minus the exercise price’s relative position in the30days’ closing prices before announce the plan. Take the ownership concentration, the size of the board, the nature of the control hunman, the company’s scale and the company’s growth as explanatory variables into OLS regression model to examine the influencing factors. Empirical analysis suggests that the opportunism timing behavior has not signi-fycantly negative correlation with the ownership concentration and positive correlation with the size of the board. In addition, the behavior has significantly negative correlateions with the scale and growth of the company. When the com-pany is state-owned, will significantly promote the generation of the behavior.That is to say, in order to achieve the desired incentive effect of equity incentive, we should take measures such as optimizing the ownership structure, controlling the size of the board, improving the independence of the independent directors,and improving the appearance of absence of the owner to curb the opportunistic timing behavior.