| Equity incentive, as a long-term incentive arrangement, is one of the most ways to resolve principal-agent problems. It derived from high speed development phase of developed country (particular in US) and has been widely applied. Our country is also actively promoting equity incentive system and formal implemented in 2006. However, in the late 90's until now, U.S. companies pay executives in stock options of abuse has led to a wide range of equity-based incentives to question and controversy. This paper is based on this point, empirically researched on China's equity incentive system from the angle of earning management.This paper, first recall the relevant research literature at home and abroad on the basis of summing up the theoretical foundation of equity incentives and earnings management, and based on this point analyzed the indispensable of the equity incentives mechanism and earnings management behavior. After that from the practice of listed companies on China's status of implementation of equity-based incentives for the evaluation and analysis, we found that the implementation of equity incentives can really improve business performance.Then this paper selects fifty among fifty-three listed companies which have implemented equity incentives before December of 2007 as a sample. It also estimates the level of earning management by adding item below the line to expanded Jones model, and based on the multiple regression model, this paper empirically analysis the impact of the equity incentive to the earning management. The result showing that: management of listed companies in the implementation of equity incentive system, exist in pursuit of high rewards for the motivated earnings management behavior and the degree of earnings management is related to the degree of equity-based incentives.Finally, this paper brings up relevant policy-related suggestions, combined with the empirical fruits and the practical circumstance. |
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