Study Of Equity Incentive And Real Earnings Management Based On Institutional Investors’ Shareholding

After the completion of the share-trading reform,China’s listed companies implemented equity incentive quickly to solve the problem of modern enterprise principal-agent.However,with the implementation of the plan,some drawbacks are exposed gradually.The huge interest temptation of equity incentive has become an important motivation for management to implement earnings management.After the exposure of the Enron financial fraud incident,the means of controlling the surplus turns to real earnings management which makes equity incentive become a tool for management to seek personal gain.The academic and practice are focus on how to circumvent earnings management and improve the equity incentive system.With the implementation of the extraordinary development strategy,institutional investors have become an important corporate governance element.Can institutional investors’ participation in corporate governance supervise the management’s manipulation of earnings effectively?This thesis selects the listed companies that implement equity incentive in 2013-2017 as the research object,examines the relationship between equity incentive and real earnings management,analyzes the impact of different types of institutional investors’ shareholdings on their relationship,and considers the impact of the external environment on the regulatory role of various types of institutional investors.The conclusion of this thesis is as follows:(1)The equity incentive plan of listed companies induces real earnings management,and the greater the intensity of equity incentive,the higher the level of real earnings management.(2)Different institutional investors have different corporate governance roles.Compared with small institutional investors,large institutional investors can significantly suppress the real earnings management induced by equity incentive;compared with non-independent institutional investors,independent institutional investors can significantly inhibit the real earnings management.(3)Considering the differences in the external environment of the enterprise,it is found that the inhibition of large institutional investors and independent institutional investors are more significant in the imperfect institutional environment,but it is no longer significant in the perfect institutional environment,so the inhibitory effect of institutional investors has been replaced by institutional environmental constraints.In addition,adequate media supervision can significantly enhance the inhibitory effect of large institutional investors and independent institutional investors on real earnings management.According to the conclusion,this thesis puts forward some suggestions to enterprise and government respectively.Enterprise should set the performance conditions of equity incentive reasonably and optimize the company’s shareholding structure.The government should strengthen supervision of institutional investors while continuing to expand its scale and guide the media to supervise enterprises.