Earnings Management In The Esops Of Listed Companies

The history of the Employee Stock Ownership Plans dated back to the United States in the 1950 s.In the 1980 s and 1990 s,there were two booms in corporate employee holdings in China.In particular,the listing of employee-owned shares in the 1990 s has had an important influence on the social economy.However,due to the incomplete system at that time,the company's employee stocks exposed many problems in practice,and the China Securities Regulatory Commission(CSRC)completely closed this way of listing.In the 21 st century,the economic and legal environment of the domestic stock market have made great progress,providing a necessary external environment for the ESOPs.On June 20,2014,the promulgation of the Guiding Opinions on the Pilot Implementation of the ESOPs for Listed Companies by the CSRC opened the prelude to the practice of the ESOPs of listed companies in China.Listed companies are an important part of China's economy.The ESOPs have positive significance for listed companies in stimulating employees,improving the company's market competitiveness,optimizing governance structure and market value management.However,there are different voices on the ESOPs in the market.The ESOPs can be a new way for the market value management of listed companies.However,the CSRC also explicitly prohibits listed companies from manipulating the price of the company's stock in the name of market value management.In reality,the boundary between market value management and stock price manipulation is usually vague,which leads to the ESOPs to be a new tool for some listed companies to “escort price placement” and “reduce shares”.The existence of these problems may have an impact on the final implementation of the ESOPs.Therefore,studying the possible problems in the ESOPs of listed companies is important for the theory of ESOPs and the development of listed companies.This paper focuses on the issue of “earnings management in the ESOPs of listed companies” and discusses it through case analysis.Firstly,the author reviews and summarizes the existing literature on ESOPs,earnings management and earnings management in ESOPs.Then,in the theoretical part,the theoretical analysis of the relationship between ESOPs and earnings management is carried out,which helped construct an analysis framework for the case analysis.Then in the case introduction section,the basic situation of Dahua Technology and the contents of the ESOPs are summarized,and the motivation of Dahua Technology to implement the ESOPs is analyzed.The final case analysis part includes two aspects: First,the earnings management in the ESOPs of the case corporation.Firstly the revised Jones model is used to calculate the degree of earnings management of Dahua Technology before the announcement of the ESOPs and before the stock sale.Then combined with the characteristics of the case corporation,the reasons why the employee stock ownership plan leads to the implementation of earnings management and the path of earnings management is analyzed.Secondly,the influence of earnings management on the effect of the implementation of the ESOPs is analyzed from the employee and enterprise perspective.This paper draws four conclusions.Firstly,the ESOPs with the major shareholder reduction led to the implementation of positive earnings management before and after the announcement of the ESOPs.Secondly,the senior management subscription behavior and the imperfect interest mechanism of the ESOPs led to the implementation of positive earnings management before and during the sale of the shares.Thirdly,Dahua's implements positive earnings management by changing the allowance for bad debts of accounts receivable and setting aside no bad debt reserve for inventories.Fourthly,earnings management in the ESOPs has a certain incentive effect on employees.However,earnings management in the ESOPs failed to have a significant positive impact on the employees as well as the company's operating performance.Based on the above conclusions,this paper puts forward three proposals as follows: Firstly,the accounting standard should be improved;secondly,the supervisory role of CPAs should be given much more attention;finally,continue to improve the mechanisms of the ESOPs.