Information Disclosure In The Implement Of Stock Ownership Incentive

The issue of “Measures for the administration of equity incentive of listing Corporation(Trial)"(it also can be called “the Measures” for short)started since 2006,which symbolized that equity incentive system was established in China formally.According to the current equity incentive system in our country,for the date of exercise,whether managers' incentive equity would be sold on the date of exercise,their individual income taxes are calculated by paying salaries,which means the taxable income equals to the difference between the exercise price and the market price of the stock on the exercise date.For the date of register,managers should be in accordance with the average price of the date of register and the date of exercise to pay tax.Furthermore,"the measures" provided the rules that the difference coming from the higher part of exercise of stock than transfer them,which belongs the income value of transfer properties(currently tax-free).Hence,the aim of this paper is that,before and after the exercise date and the register date,the enterprise managers understanding the inside information have the motivation to manipulate stock price and reduce the price between the market and the exercise through using of information disclosure and other opportunistic behavior.The purpose of doing so is to reduce the personal income tax paid and increase tax revenue,so as to maximize returns.According to the introduction above,the main work of this paper is presented as follows,in my research,356 companies are chose to be examples,which are listed in Shanghai or Shenzhen Securities Exchange,during the period from “the Measures” was issued to December 31,2015.Some domestic and foreign academic achievements will help me to prove the hypothesis on enterprise managers increasing the tax benefit.First of all,the normative research method is used to analyze the changes of stock price,calculate cumulative abnormal return,and apply descriptive statistics and test.After that,several models are published by using company characteristics and management authority as variables,linear regression is adapted to study whether executives can make selective disclosure for their own profit.Last but not the least,good and bad news for companies are re-definition and re-classification to further clarify the relationship between the selective of information and the strength of equity incentive.The conclusions drawn are as follows:(1)Before the date of exercise,the stock price has a significant negative return,whereas after the date of exercise,the stock price has a significant positive abnormal return.(2)For the purpose of increasing tax revenue,executives are willing to expose bad news before the exercise and register date and release good news after the exercise and register date.During the period before and after exercise data and register date,managers will disclose information selectively,in order to improve the value of stock options,reduce the exercise cost and decline the personal income tax(3)Due to the increase of tax revenue,the higher position the management authority of executives have,the higher possibility information will be disclosure during the date of the exercise and register.They have a very close relationship.