Corporate Governance Characteristic And Opportunistic Authorization Timing

Since the 2006 “the Measures for the Administration of Equity Incentive Plans of Listed Companies” issued by the CSRC, more and more listed companies have introduced equity incentive. Equity incentive is aimed at solving the problem of agent conflict in its initial design, through unifying the interests of the agent and principal. However, it’s still a question that the implementing effect of equity incentive could achieve the desired without a sound system and corporate governance mechanism in our country. Foreign studies show that equity incentive tends to cause the opportunistic timing. The timing behavior of aiming to reduce the exercise, weakens the effect of the implementation of equity incentive, and become another way of management to grab interest. Therefore, the study of opportunistic authorization timing, to improve the implementation of equity incentive is important.On the basis of previous timing studies, this article, with disclosing the stock option incentive draft announcement of the listed companies from January 1st of 2006 to December 31 st of 2014 as the study sample, analyzes the existence of opportunistic authorization timing, and the impacts of corporate governance characteristics on the opportunistic authorization timing. This paper tests the existence of the opportunistic authorization timing through the following two aspects, which are the CAR distribution characteristics of different window periods by event study and the information disclosure characteristics around the draft announcement. We use the short-term market reaction to the recent quarterly reports and the increase or decrease of quarterly net profit to test information disclosure characteristics. Finally, the influence of corporate governance characteristics on the opportunistic authorization timing is empirically tested by constructing Logit regression model.This paper finds that: the CAR before the draft announcement of stock option incentive plan are negative, though not obviously, the CAR before the draft announcement of stock option incentive plan are positive,through the T test of 30、25 and 15 of the CAR distribution characteristics and the difference of their average around the draft announcement; there are more bad news before the draft announcement and more good news after the draft announcement, through testing the short-term market reaction to the recent quarterly reports and the increase or decrease of quarterly net profit, which verifies the existence of opportunistic timing behavior of the management in the process of equity incentive authorization. At last, we construct Logit regression model and robustness test the influence of corporate governance characteristics on the opportunistic authorization timing from the aspects of internal governance mechanism and external governance environment, through using the difference of CAR as a measure of timing. The results show that: The greater the power of management, especially in state-owned enterprises, management is more prone to opportunistic timing behavior in the process of equity incentive authorization, which indicates that the internal governance mechanism is negatively related to the opportunistic authorization timing; the lower the degree of government intervention, the more prone to the management of opportunistic timing behavior.Above empirical results show: in China the process of implementation of equity incentive, management presence opportunistic authorization timing. Therefore, the optimization exercise price formulation mechanism, standardizing the information disclosure mechanism, improving the internal management mechanism and external governance environment to restrain the opportunistic authorization timing is important.