Research On The Termination Of Accounting Treatment By Equity Incentive Plan

Since the Measures on Administration of Equity Incentive for Listed Companies was officially carried out in 2006,more and more use incentive plan to the principal-agent problem.Until 2016,the number of listed companies carrying out equity incentive plans is1195,which makes up 36.73% of the amount of listed companies till the end of 2016.but20% of the companies have terminated the equity incentive plan.Though many companies stopped equity incentive,few scholars study the problems of termination of equity incentive and relevant accounting standards are not perfect.Particularly terminate equity incentive requires option tariff of accelerated withdrawing,which would greatly affect corporate finance,causing possible earnings managements and negative markets reaction.So it's meaningful to analyze potential problems of accounting treatment when terminating equity incentive.This thesis by comparing the relevant accounting treatments of equity termination at home and abroad,found that China's equity incentive termination or cancellation of the provisions of more stringent,not allowed to modify,the company can only choose to cancel or take the initiative to terminate.This thesis,adopting the method of case analysis,studies the accounting treatment and related financial results of two different abortion of equity incentive of Noposion.The first equity incentive plan is invalid naturally because it didn't meet with vesting conditions,which had a minor effect on the company.The third plan is aborted actively at early stage of implement.Due to option tariff of accelerated withdrawing,corporate financial performance and the accounting information quality are greatly affected.By vertical and horizontal comparisons we find that option tariff of accelerated withdrawing causes corporate financial performance to decline sharply and first huge loss on profit.Calculations with Jones model find that if the company holds the idea of “Let me lose enough”,and manage the earnings will reduce the reliability of accounting information.By the CAR value of equity incentive abortion we can see a remarkable market reaction,which posse much information and value relevance.But the reaction is obviously negative.It indicate the negative attitude of investors.Different ways to stop will obvious cause different results,but this difference may possibly open a gate for corporations to manipulate profits.By comparing the accounting treatment and merit and demerit of the two equity incentive termination methods,we find that natural invalidity won't cost the company much,but waiting passively is not good to encourage the employees.However terminating actively saves time so that company can remake suitable incentive plan,but option tariff needs accelerated amortization,which affects administration expense and profit,causing the corporate performance to fluctuate largely even become the tools for earnings managements,lowering the reliability of accounting information.So this thesis proposes a thinking to perfect the accounting treatment of equity incentive abortion.The perfection starts from using new incentive plan to replace the original one,distinguishing the cause for abortion and regulating different methods of accounting treatment as well as strengthen supervision on announcements.In hope to fulfill the blank of pertinent literature and prevent listed companies use the leak of equity incentive accounting standard to manage earnings and lower accounting information quality.