Managerial Stock Incentives Effect Study Based On The Perspective Of Earnings Management

With the separation of corporate ownership and management, the asymmetricinformation and interests conflict between shareholders and executives aggravated,which lead to serious agency problems. In order to constrain the executives’self-interest behavior and encourage executives to work hard to maximize the interestsof shareholders, the managerial stock incentives emerged. Recently, our country hasintroduced the managerial stock incentives policies and regulations. Meanwhile, theimplementation of the share reform cleared the way for the managerial stockincentives. The enthusiasm of putting the managerial stock incentives into practice isunprecedented high. This environment provides the research samples for thedomestic scholars to conduct the study of the managerial stock incentives. In addition,the managerial stock incentives in our country is still in its infancy, can themanagerial stock incentives achieve the desired incentive effect, then improvecorporate governance, and play an active role in the firm performance, these issueshave not yet formed a unified conclusion. Therefore, the research of the managerialstock incentives, earnings management and corporate governance has sometheoretical and practical significance.This dissertation is composed of three parts: the review of the literature andtheories, the current situation analysis of the managerial stock incentives and theempirical test. The dissertation presents the literature and theories of the managerialstock incentives, earnings management and corporate governance in the first part. Inthe second part, this paper describes the current situation of managerial stockincentives in our country and figures out the current existing problems. In the thirdpart, select the sample data for empirical research, use Eviews6.0, Excel and SPSSsoftware for data descriptive statistics, analyze the relationship between managerialstock incentives, earnings management and corporate governance with correlationanalysis and regression analysis. Then, the paper puts forward some suggestionsbased on the conclusions of this study. The paper shows that before adjustments for earnings management, managerialstock incentives are positively related to corporate performance, while afteradjustments for earnings management, the impact of incentive-based compensation oncorporate performance significantly decreases. Besides, the evidence in this papershows that the corporate governance exists a significant negative impact on theearnings management which induced by the managerial stock incentives. In otherwords, firms with poor governance face the negative effect of earnings management.Finally, the paper puts forward some policy recommendations from the conclusion ofthis study: to consummate the corporate governance structure, select the appropriatemode of managerial stock incentives, strengthen the construction of the capitalmarket, improve the performance evaluation mechanism.