The Research On The Relationship Between Equity Incentive Program And Earning Management In The Chinese Listed Companies

With the widely application of modern enterprise system, principal-agent problems caused by the separation of two rights continue tobe highlighted and the agent cost increases, equity incentive is a very good way to solve this problem. Equity incentive system as a long-term incentive system, keeps the company executives have the opportunity to share the remaining property in the company, so as to encourage them to work hard, improve the value of the company. Equity incentive system was first introduced into the enterprises of our country in1993by Vanke into its corporate governance, it marked the establishment of relevant regulations for the process of equity incentive system and program in Chinese listed companies, with the "Equity incentive management approach of Chinese listed companies(Trial)" promulgated in2006. Subsequently, more and more Chinese listed companies apply equity incentive mechanism into its corporate governance.But because of the incomplete contract and the asymmetry information between owners and operators of the company, executives are likely to manipulate the company’s financial report to acquire equity incentive related earnings. There will be positive and negative effects with the implementation of equity incentive plan. It can not motivate executives to work hard by little incentive degree; it will stimulate the executives’earnings management behavior by large incentive degree and has a bad impact on the long-term development of the company. Therefore, the validity of equity incentive has been questioned, and the affect of executives’ manipulation behavior caused by the implementation of equity incentive plan has attracted widely attention of scholars at home and abroad.According to the above phenomenon, this article is a research on whether the implementation of equity incentive plan can effect the earnings management behavior of executives. In the analysis of the differences, it uses the results based on three types of econometric model of earnings management to enhance the comparative between the test, and uses paired sample T test to find the difference between the sample data and the data from a year ago in order to judge if there are differences in the degree of earnings management before and after the implementation of equity incentive plan; On this basis, it designs multiple regression analysis to explain the relationship between the main factors in the equity incentive program and earnings management.The structure of this paper is organized as follows:first, it introduces the concepts and theoretical basis related to the equity incentive and earning management, and reviews the present research situation of home and abroad, to clear the main research direction of this paper; secondly, it finds out the main problems existing in the project implementation in China’s listed Corporations through the analysis of the status; thirdly, it puts forward the hypothesis of this paper and selects the research model according to the research of theoretical analysis, situation analysis and the research priorities; finally, it is a part for empirical analysis and suggestion of this paper, it gives the statistic and economic explanation for the empirical results, then proposes suggestions. The analysis results of this paper will be helpful for the formulation of equity incentive program of Chinese listed companies and policy formulation of supervision department.