The Impact Of Equity Incentive Scheme On The Earnings Management

Two rights separation of ownership and managerial authority of the corporate governance structure, make the difference between management utility function and shareholders’utility function. Solving entrusted agency conflict between shareholders and management is to solve the conflicts of interest between shareholders and management, so the equity incentive arises at the historic moment. However, in the "Enron event" and some other companies financial scandals, academia, regulatory authorities and stakeholders to re-examine the equity incentive effect. Equity incentive does not eliminate information asymmetry^imperfection of principal-agent contract and self-interest between managers and stakeholders, that leads to earnings management based on contract. Because of domestic equity incentive system started late, and completed shareholding reform in2006, despite a large number of literature confirms the earnings manipulation in listed companies in our country, whether the equity incentive as a motivation triggers the earnings management, the relationship is not clear.From January1,2006to December31,2012, in total2492a-share listed companies announced equity incentive plans, compare the announcement equity incentive of listed companies and the remaining companies before being so announced the degree of earnings management of listed companies, verify the existence of equity incentive can lead to higher level of earnings management of listed companies. After verifying whether "relevant", further study on "how", the number of a-share listed companies announced the implementation of equity incentive plan is386, three years following the announcement equity incentive agent relationship between variables and the degree of earnings management are studied, the results show that, after the equity incentive in the announcement, has higher level of earnings management, and incentive stock quantity have no significant relationship, but with the equity incentive plan overall duration has significant negative correlation relationship. This means that the equity incentive motivation inevitably induce earnings management as a contract, should by extending the duration of the incentives to curb earnings management as a whole.