Equity Incentive,External Governance And Earnings Management

Since December 31,2005,the number of listed companies that announced the implementation of the equity plan has shown a rapid growth trend.According to the statistical data of Wind database,the number of listed companies has been increasing rapidly since December 31,2005.Since the implementation of the above measures in China,as of December 31,2017,a total of 1002 listed companies in China have declared the draft equity incentive plan and have a positive attitude towards the effectiveness of the equity incentive plan.The number of listed companies announcing and implementing equity incentive plan is increasing,and it is more common for private listed companies to use equity incentive as incentive means.Therefore,the issue of equity incentive effect of listed companies has gradually aroused widespread concern and extensive research in both theoretical and practical circles.Since 1980,the academic circles at home and abroad have begun to study the earnings management of senior managers.After many years of research,the theories and time achievements accumulated to this day have been very fruitful.Many of them are of great groundbreaking significance.In the constant development of the capital market,it is inevitable that some senior managers will use their position in the listed companies to adjust their profits by whitewashing their profits to meet certain interests.Demand and supply are often concomitant with each other.Capital market provides special market conditions for the birth of earnings management.Academic circles believe that earnings manipulation can effectively improve the performance quality of listed companies to a certain extent and is conducive to the long-term development of listed companies.Therefore,we support the earnings management or earnings manipulation of the top managers actively,but as the earnings whitewash of the"self-interest behavior" of listed companies,we adjust the earnings by using the characteristics of asymmetric information in the capital market.Behavior itself is still a kind of hoodwinking for the lack of information such as capital market investors or other stakeholders,and earnings management or earnings manipulation often leads to short-sighted tendency of senior managers.Therefore,to establish a capital market mechanism to protect investors,an important measure is how to improve the corporate governance mechanism.To regulate the earnings manipulation of listed companies.The measures on Stock incentive Management of listed companies promulgated by the CSRC on January 1,2006(for trial implementation),will be implemented as of August 13,2016.Since the stipulation-"measures for the Management of Stock ownership incentives of listed companies",However,more theoretical and practical studies have found that equity incentive is one of the solutions to the principal-agent problem caused by the separation of ownership and management.In the actual operation of listed companies,the senior managers of listed companies choose to manipulate earnings through various means in order to realize the equity incentive income in the stock incentive draft.By studying the equity incentive mechanism of listed companies and earnings manipulation of accrual items of senior managers,it is found that in the process of announcement and implementation of equity incentive plans,The earnings manipulation behavior of the senior managers has a significant change.The earnings management of real activities in the continuous improvement of accounting standards,and international accounting standards continue to converge,Against the background of the constant health of relevant laws and regulations and the continuous strengthening of the supervision of the capital market,due to its hidden characteristics,It attracts the attention of the senior managers who are attracted by accrual earnings management,and the external governance,which is an organic complement to corporate governance,When the top management is engaged in earnings manipulation under the stimulation of equity incentive income to obtain abnormal returns,acquisition can play a role in alleviating the expected effect of equity incentive plan.Therefore,based on the existing theoretical and practical research results of academic circles at home and abroad,this paper studies the relationship between equity incentive and earnings management from different angles and directions.As the agent variable of earnings management degree of listed companies,the operable accrual earnings management and real activity earnings management,through the definition of relevant concepts,comb the existing theories,and carry out multivariate regression analysis and grouping regression.It is found that prior to the implementation of the equity incentive plan,the senior managers of listed companies will conduct negative earnings management through the means of real earnings management,thus reducing the stock market price before the publication of the draft equity incentive plan.Therefore,the restricted stock grant price of the subject matter of equity incentive or the exercise price of stock option can be lowered to obtain extra income beyond normal income.The stronger the intensity of equity incentive is,the greater the earnings management degree of senior managers is.However,there is no evidence of earnings management manipulation by senior managers after the announcement of the draft equity incentive plan.The most commonly used subject matter of equity incentive is restricted stocks and stock options.When managing differences in impact,it is found that the top managers of listed companies who adopt restrictive stock as a means of equity incentive are more likely to carry out negative real earnings management.When examining the institutional investors,how market competition acts as an external governance mechanism in this correlation,It is found that institutional investors can not restrain the earnings management of senior managers because of the large differences in the proportion of institutional investors in different listed companies,but the stable institutional investors can supervise the senior managers.As an effective external governance mechanism,market competition can reduce earnings manipulation caused by equity incentive of senior managers.This paper provides new evidence for the study of the relationship between equity incentive and earnings management and enriches the research on the relationship between equity incentive and earnings management by external governance.