Comparative Study Of The Effectiveness Of Equity Incentive Between The Main-Board And Second-Board Market

With the continuous improvement of laws and regulations as well as the completion of equity division reform, company’s equity incentive behavior in China has come into a new stage of development. As the tool which can contribute to solve the Agency conflicts effectively, more and more companies begin to introduce equity incentive into management system, and thereby hope to improve internal governance and business performance. In the real operation, equity incentive can really have a positive effect for a certain extent. But at the same time, due to the inadequate of internal governance mechanisms, weak external supervision and other reasons, equity incentive which based on accounting information may be difficult to achieve the positive effect, and lead to negative behaviors such as earnings management on the contrary. In addition, due to the different of company size, stage of development, supervision and other aspects, listed companies which carry out equity incentive may have some differences on the implement effective and earnings management may.This paper has selected companies from the manufacturing industry in main-board market and in second-board market during 2009 to 2013 as observed sample, and has done the comparing study to find the difference of effectiveness between two markets. In the empirical analysis, this paper used both accrual earnings management and real earnings management to measure earnings management of the company, and identified the difference between the main-board market and second-board market through descriptive statistics, T-test and regression analysis. This paper has reached the conclusions after the above steps. Firstly, companies in main-board market tended to adopt accrual earnings management in the previous year before the pass of equity incentive plan, and tended to use real earnings management to adjust the performance after the year which passed the plan. Otherwise, companies in second-board market tended to use accrual earnings management both before and after the year which the plan passed. Secondly, companies in main-board market presented positive correlation between equity incentive and revised earnings management both before and after the year which the plan passed, but presented negative correlation in the year. While companies in second-board market presented negative correlation in the three years, and the negative effects was obvious than main-board market.Based on the empirical findings, this paper has carried out proposals about how to strengthen internal supervision and how to strengthen external supervision. Finally, based on the literature study and empirical operation, this paper raised prospects about to establish long-term effects research and applicable earnings management model in the future.