Research On Earnings Management Before Announcement Of Welfare Equity Incentive In Listed Companies

Separation of control and ownership from the company has created a conflict of interest between management and the owner,that is,the principal-agent problem.Equity incentives can theoretically resolve this contradiction,enable management to own part of shareholders’ interests,and balance the short-term and long-term interests of management,which is helpful to the company’s long-term development.Equity incentives originated in the United States in the 1950 s and were introduced to China in the late 20 th century.The China Securities Regulatory Commission promulgated the Measures for the Administration of Equity Incentives for Listed Companies(trial)in 2006,and equity incentives have been widely used since then.According to the CSMAR database,as of 2019,the Chinese A-share market has announced a total of 4,116 equity incentive plans.In the process of implementation,there are problems that are contrary to the agency problem,which leads management to use equity incentives to increase their own rewards,which will affect the formulation of equity incentive plans and negative earnings management to expand their own benefits,make equity incentives welfare,lack incentive effects,and harm the interests of small and medium shareholders.Excessive welfare also makes it difficult to pass and implement equity incentive plans.This article analyzes the market environment of the A-share market,the status quo of equity incentive plans,and the evolution of earnings management behaviors.The draft equity incentive plan announced from January 1,2017 to December 31,2017 is selected for welfare and incentive types.Define,determine whether there is earnings management behavior before its announcement,and analyze the relationship between earnings management and welfare-type and incentive-type equity incentives.This article takes Henan Thinker Automatic Equipment Co.,Ltd.as the research object,and builds on the theories of rational economic people,principal-agent theory,human resource management theory,and management power theory,and studies the earnings management behavior and the welfare of content design in equity incentives.According to the criteria of incentive conditions and validity period,this article judges whether the five equity incentive of train of thought control is welfare equity incentive or not.Except for the first time,it can not be judged as welfare equity incentive according to the criteria of incentive conditions.In other cases,they are welfare equity incentive.The content and abnormalities of equity incentives are used to identify the tendency of earnings management and the analysis of some subjects to determine whether there is earnings management behavior.Analyze the deep-seated reasons for its welfare-type equity incentives and earnings management.The conclusions,enlightenments and suggestions of case analysis are comprehensively obtained.Through the study of the case,it is found that the forthcoming launch of the equity incentive plan has induced earnings management behaviors,lowering the stock price by making low earnings,choosing a low performance benchmark for the equity incentive plan,reducing the acquisition cost of restricted stocks and setting a low performance standards and the validity period of incentives make it easy for incentive objects to reach incentive conditions and lack long-term incentive effects.The content of the welfare equity incentive plan is formulated as follows: low standards for unlocking conditions,high unlocking ratio,short validity period of incentives and large number of incentives.The main causes of welfare are attracting and retaining talents,the influence of management’s power,making up for insufficient salaries of employees and avoiding taxes.Unlike state-owned enterprises,Henan Thinker Automatic Equipment Co.,Ltd.is a private enterprise with absolute control over major shareholders.When formulating equity incentive plans,there are expectations of controlling shareholders,whether express or implicit,and the inaction of the supervisory board and independent directors.