The Relationship Between Informativeness Of Stock Price And Earnings Management Stimulated By Equities Incentive

The security market is the most important and active market of the financial market. The ability of a security market to direct capital largely depends on whether stock price can provide right signal to lead investors make proper capital allocation decisions. Therefore, the informativeness of stock price is directly connected to the efficiency of security market. As one of the widely used incentive mechanism, equities incentive attracts a lot of attention from the researchers for its relationship with informativeness of stock price. Besides, analyzing the relationship between equities incentive, earnings management and informativeness of stock price can further discuss the influence mechanism between them. This article used the data of A-share listed companies between 2005 and 2014, took stock synchronicity as the measurement of informativeness of stock price, based on the analysis of the relationship of equities incentive, earnings management and stock synchronicity, used intermediate variable models to further analyze whether the earnings management will act as an intervening variable in the relationship of equities incentive and stock synchronicity.The findings of this article were: in non-state owned companies, equities incentive was positive correlated with both earnings management and stock synchronicity, while there were a reverse U shape relationship between earnings management and stock synchronicity. However, in state owned companies, only earnings management still maintained a positive correlation with stock synchronicity. Besides, in non-state owned companies, the intermediate effect of earnings management was significant, indicating that the earnings management stimulated by equities incentive had a significant positive correlation with the stock synchronicity. However, the intermediate effect was rather small comparing with the direct effect of equities incentive, indicating earnings management was not the most important factor that determine the relationship between equities incentive and informativeness of stock price.