Research On The Influence Of Equity Incentive On Management’s Earnings Forecasting Behavior

The earnings forecast is the management’s simple summary and forecast of the company’s financial information before the regular financial statements are issued.Compared with financial statements,earnings forecasts is less authentic,more discretionary and more subjective.But the earnings forecasts also provide directional forecasts for the financial information of listed companies,and is not only an important part of information disclosure of corporations,but also a significant reference for investors to make decisions.Therefore,the research on the quality of the earning forecast has certain practical significance.From a theoretical perspective,in recent years,with the rapid development and maturity of data analysis and text information analysis methods,many scholars have turned from the study of data to text analysis in financial statements.As a result,the earning forecast information,which is mainly written with text information,has also attracted more and more scholars’ attention.As an important factor influencing the level of corporate disclosure,equity incentives may also have a significant impact on management earning forecasting behavior.Therefore,this thesis proposes to examine the relationship between equity incentives and management earning forecasting behavior.This thesis firstly briefly compares the changes in China’s earning forecasting system and analyses the characteristics of China’s earning forecasting system,followed by a research analysis of relevant domestic and international literature,and then,through the study of principal-agent theory,asymmetric information theory,signalling theory and incentive theory,analyses why and how equity incentives have an impact on management earnings forecasting behavior.In the empirical study,this article selects the financial data and management earning forecast information of Chinese listed companies from 2014 to 2020,measures the quality of management earning forecast information by using four variables,establishes multiple regression models,and conducts correlation analysis and regression analysis.The results show that equity incentives can significantly improve the formal reliability of earning forecasts,but have a limited impact on the substantial reliability of earning forecasts.This thesis also conducted a series of robustness tests,replacing the measure of earning and using the propensity score matching method to test the regressions again.The regression results showed minor changes but did not affect the conclusions.In the economic consequences test,we found that the listed companies that released the earning forecast information have stronger innovation ability,and the innovation ability is mainly reflected in higher innovation input and more innovation output.Companies with equity incentives are more motivated to forecast their results,and the forecasting results are more precise and accurate,which means that equity incentives improve the quality of information on earnings forecasts in these three aspects.This thesis provides a possible new path for the impact of equity incentive on listed companies,improves the research on the influencing factors of earning forecasts and provides ideas for investors to obtain highquality information;enriching the research on the impact of earning forecast on corporate governance from the perspective of corporate innovation.