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Equity Incentive,Real Earnings Management And Institutional Investors:Theory And Empirical Analysis

Posted on:2017-12-29Degree:MasterType:Thesis
Country:ChinaCandidate:S Y WangFull Text:PDF
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Since the 1980s,studies on earnings management began to sprout in both domestic and abroad academe.Till now,those studies have made some remarkable achievements.In the capital market,some listed companies adjust profits to white washing their performance,there emerged as earning management,and over time it has become a disease which is difficult to eliminate.Earnings management has its own point,there is no lack of supporting voice from scholars,they hold that moderate earnings engagement has a positive effect on company performance.But as a self-interested behavior of listed company,taking use of information asymmetry to adjust surplus,is still a kind of "concealment" and "deceit" to investors.Besides,this behavior always followed by sacrifice of long-term benefits,thus it’s more like a short-sighted behavior.Therefore,it’s an important question to think that how to restrain earnings management for investor’s protection,which is also an important standard to identify effective corporate governance mechanisms.Ever since China securities regulatory commission promulgated the Listed Companies Incentive Management Approch,was promulgated by China securities regulatory commission in 2006,more and more listed companies carry out equity incentive plans.However,an increasing number of research found that the equity incentive may cause earnings management,while it was designed to solve the principal-agent problem.Meanwhile,effective corporate governance is likely to reduce earnings management behavior caused by the implementation of equity incentive plans,thus ensure the positive effect of the equity incentive.Many scholars studied on the relationship between equity incentive and traditional accrued earnings management,found that equity incentive plans can have a significant impact on earnings management.Nowadays,as accounting standards getting more perfect,laws and regulations getting further improved,management prefers to take real activity earnings management as the way to manipulate surplus because it is more subtle.Based on the above,this thesis consults present research both at home and abroad,combined theoretical and empirical research method to analyze the correlation among equity incentive,real activity earnings management and institutional investor holdings.This article is divided into six parts:Part one,introduction.State the research motive,significance,contents and methods,prepare for following thorough research.Part two,literature review.Summerize existing literatures from three aspects:definition and motivations of real activity earnings management,equity incentive’s action mechanism on earnings management,institutional investors’ control mechanism on earnings management.Part three,theoretical analysis.Define the concepts of earnings management and equity incentive,analyze theoretical basis of their existence.Explain the relationship between equity incentive,earnings management and institutional investors theoretically.Part four,research design.Introduce the three proposed research hypotheses,variable design and model building.Part five,empirical test.Use regression analysis method to testify the correlation between equity incentive and real activity earnings management,furthermore institutional investors’ impact on this relationship.Part six,conclusions and suggestions.State research conclusions,propose targeted policy suggestions and research insufficiency.The innovation points of this thesis:(1)enrich the studies on the relationship between equity incentive and earnings management.(2)view institutional investors as a kind of external governance mechanism,research its effect on the relationship between equity incentive and earnings management.
Keywords/Search Tags:earnings management, equity incentive, institutional investors
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