The Relationship Between Equity Incentive And Earnings Management

Equity incentive is a double-edged sword. On one hand, it can improve the sensitivity of compensation and performance, solve the principal-agent problems, on the other hand, it urges managers to implement self-interest behavior to obtain more additional returns which can also damage the interests of shareholders and generate the principal-agent problems. In this paper, I prove that the equity incentive significantly positive correlate with earnings management. I use management authority as influence factors to explore their impact on the relationship between equity incentives and earnings management. Finally, I provide suggestions for equity incentive from the management level.At first,I use PSM to test the effect between enterprises which use equity incentive. It is concluded that the enterprises which use equity incentive corporate earnings management phenomenon more seriously. We test the relationship between real earnings management at the same time. Then I test weather high power will strengthen the probability of earnings management that equity incentive induced. The article further discusses the relationship between equity incentives and earnings management between corprations with different property rights on the basis of managerial power. We get conclusions : first,enterprises with equity incentive accrued earnings management more seriously,rather than real earnings management;Second,the equity incentive intensity was positively related with accrued earnings management relations,with no significant positive correlation with real earnings management; third, enterprises with managers whoes power is concentrated does not constitute the cause of the earnings management related with equity incentive,rather than decentralized managers;Fourth,the relationship between earnings management and equity incentive is positive strengthly in nonstate-owned,while there is no correlation in the state-owned enterprises. Finally,according to research results,I propose from the aspects of governance and analyze the shortcomings of this article.