Performance-Based Equity Incentives,Exercise Rights Vesting Restriction And Stock Price Crash Risk

The sharp rise and fall of stock prices has been accompanied by the development of China's capital market,especially the stock price crash risk caused by the rapid decline in stock prices,which not only erodes the wealth and interests of investors,but also jeopardizes the stability and development of the real economy.Due to the hidden and selective disclosure of negative information by the self-profit company management,thus causing the negative information continue to accumulate and then released into the market and incurring the stock price crash risk.China implements performance-based equity incentives,which were formulated and implemented to ease the agency conflict and realize benefit and risk sharing between shareholder and management.However,the equity incentive plan in practice has obvious welfare motives and self-interest tendencies,thus intensifying the self-interested motivation and opportunistic behavior of the management.To some extent,it becomes a tool for management to seek its own interests and erode shareholders' equity.Then the impact of the implementation of the performance-based equity incentives and the formulation of the exercise restrictions on the stock price crash risk,becoming an important entry point for studying the formation mechanism and influencing factors of the stock price crash risk.It has extremely important theoretical and practical significance for preventing financial risk,safeguarding investors' rights and promoting the healthy and stable capital market.We expand the economic consequences of equity incentives from internal company to the capital market,exploring the impact of performance-based equity incentives on the stock price crash risk.We select the A-share listed companies from 2008 to 2017 as the research objects,and use the double difference model(DID)to measure the policy effect of the equity incentive plan,studying the impact on stock price crash risks.At the same time,we analyze the differences in exercise restrictions from the micro perspective,studying the impact of exercise performance standard and exercise time restriction on the stock price crash risk.Then we analyze the transmission mechanism between equity incentive and stock price crash risk based on the accounting conservatism,and the internal and external governance mechanisms are taken as the entry point to analyze the governance effect of internal control quality and external audit quality.Finally,we use the propensity score matching(PSM)and the double difference model(DID)to test the validity of the conclusions of this study.The paper draw the following conclusions through the empirical test: the implementation of performance-based equity incentives will aggravate the stock price crash risk,and this positive relationship exists only in the case of lower internal control quality and external audit quality.After considering the exercise restrictions,we find that the stricter exercise performance standard and the longer exercise time restriction will aggravate the stock price crash risk.This explains that the strict setting of the exercise restrictions will deviate from the actual operation of the company and enhance the self-interested motivation and opportunistic behavior of the managements.Further investigation found that accounting conservatism has a significant partial mediation effect between equity incentives and the stock price crash risk.It shows that the implementation of equity incentives incur the stock price crash risk by affecting management's choice of information recognition methods and disclosure levels.After controlling the effects of endogenous problems,the empirical results also verify the validity of the research conclusions.We study the related research on equity incentives and the stock price crash risk,thus deepening the research perspective of stock price crash risk and expanding the research field of equity incentives.At the same time,it provides empirical and useful reference for the listed company to develop an effective equity incentive plan and improve the internal and external governance mechanism.And it also provides governance ideas and practical guidance for the regulatory authorities to standardize the equity incentive system and increase supervision strength.