Influence Of Managerial Power On The Choice Of Market Timing For Announcement Of Equity Incentive Plan

Equity incentive is a relatively western mature institutional experience introduced into China’s capital market in recent years,which is designed to alleviate the conflict of interest between executives and shareholders through incentive-compatible goals.From the perspective of the beneficiary of equity incentive-management,on the one hand,given the institutional design of equity incentive in China,the stock market price on the announcement date of the board is directly related to the grant price of the restricted stock or exercise price of the stock option,affecting the actual profit of the manager,and therefore the market timing behavior of managers in the drafting of incentive plan is motivated by self-interested purposes.On the other hand,considering the market timing ability of the manager: one is the manager can exert its influence upon the board by means of the right,and interfere the drafting of incentive plan by the wage and evaluation committee of Listed Companies’ board,which wait relatively passive and timing the market;another is the more powerful manager can manipulate the information disclosure,meanwhile seize on bad news to drive down the share prices before the announcement day,which create favorable opportunities initiatively.The data employed in this paper refer to stocks belonging to the A-share listed companies,we have large information on a large sample of management share ratio of less than 5% over the period 2004 through and including 2017.We investigate the institutional design of equity incentive and the real problem existing in the capital market of China,based on Market-Timing Theory,Principal-Agent Theory and Managerial Power Approach.We study the effect of the concentration of managerial power on the market timing behavior of drafting the incentive plan of the board.Moderating effects model is established to examine the existence of market timing behavior.We analyze whether the manager exert influence on the drafting of incentive plan due to self-interested motives.We also examine the manager announce the board plan by increasing the intensity of incentive implementation or select a lower price and downturns in the stock market,even release bad news more proactively to create the opportunities of downturn in the market due to self-interested motives.We found that the rights of managers positively affects the intensity of the implementation of equity incentives,which confirms that managers are motivated and capable of intervening the draft of incentive plan to maximize their own interests.We indicate that the existence of the market timing behavior in the equity incentives plan making,the managerial power appear to be particularly significant in regulating the market timing behavior and even the inherent reason for the behavior.These findings suggest investors and regulators in the securities market to alert the market timing behavior of managers in the implementation of equity incentives due to self-interested motives.This paper also offers empirical results for marketing decisions by the market entity and supervision of the regulators,in order to regulate the development of China’s securities market and protect small and medium investors’ intersets.