Research On Effect Of Equity Incentives On Earnings Management From The Perspective Of The Life Cycle Of Listed Companiesy

The separation of the two powers of modern enterprises leads to information asymmetry.In order to maximize their own interests,Managers use their advantages and powers of information to purposefully manipulate external financial statements and their disclosure process.This is Earnings Management.Currently,earnings management is divided into accrual-based earnings management and real earnings management.Earnings management through changes in accounting estimates,changes in accounting policies,or the construction of real events in corporate transactions,to affect the accurate transmission of accounting information and accounting information users access to accurate financial information,damage to the interests of enterprises.So the question that needs to be solved is: how does the company design a reasonable and effective solution under the condition of information asymmetry,so that the interests of shareholders and management tend to be consistent.In this regard,equity incentives are a superior solution.However,in real companies,equity incentive conditions are often related to corporate profits or certain accounting indicators.Senior managers will choose accruals and real earnings management in order to achieve exercise conditions,making the use of equity incentives less than expected.The enterprise life cycle is the performance of the company's dynamics,and companies in different life cycles use the same corporate strategy and management methods,and the resulting effects are different.In the same way,companies want to constrain the earnings management behavior of managers through the implementation of equity incentives,and they should also establish a sound equity incentive system based on the life cycle of their own companies to achieve the expected results.From the perspective of the enterprise life cycle,this article explores the impact of equity incentives on the earnings management of corporate executives.This article introduces the life cycle theory and considers the company as a dynamic whole.It studies companies in growth,maturity,and recession,and uses the number of equity incentives granted by the listed company that has passed the equity incentive plan at that time as the proportion of the company's total share capital as the agency variable of equity incentives.At the same time,measures earnings management from the perspectives of accrual-based earningsmanagement and real earnings management.This perspective is more innovative and enriches academic research.This article selects the companies that have passed the equity incentive plan in the Shanghai and Shenzhen A-share listed companies from 2013 to 2016 as the research object.After screening,a total of 1038 sets of data were obtained,including 570 in the growth period,324 in the mature period,and 144 in the recession period.The number of incentive variables for the equity incentive degree is selected from the proportion of incentives granted in the equity incentive plan(INCENTIVE).Earnings management is divided into two categories: accrual-based earnings management and real earnings management.This paper uses the Jones revised model to measure the degree of accrual-based earnings management,and draws on the measurement model proposed by Roychowdhury,uses the four indicators of abnormal cash flow(EM_CFO),abnormal cost(EM_DISX),abnormal product cost(EM_PROD)and the composite indicator RM to measures the degree of real earnings management.The study divided the sample into three major life cycle phases.Descriptive statistics,correlation analysis,and regression analysis were performed for each phase.The following conclusions were obtained:For firms in growth stage,their equity incentive level is positively correlated with the level of accrual-based earnings management,and the degree of equity incentives is also positively correlated with the actual earnings management level;In mature companies,the degree of equity incentives is positively correlated with the level of accrual-based earnings management,and the degree of equity incentives is negatively correlated with the real earnings management level;In the recession period,the degree of equity incentives of the companies is negatively correlated with the degree of accrual-based earnings management,and the degree of equity incentives is positively correlated with the actual earnings management level.At the end of the article,the companies that have implemented the equity incentive mechanism have made relevant recommendations one by one according to the life cycle stages of the company,in order to increase the incentive effect of equity incentives.