Study On Equity Incentive And Earnings Management Under The Perspective Of The Firm Life-cycles

To date, there have no some agreements about the relationship betweenstockholder’s rights-drive and earnings management except for some valuableviews to some extent. Based on literature review, enterprise is a carrier of therelationship between them, so many scholars at home and aboard have separatelyinjected stockholder’s rights-drive and earnings management into the enterprise’slife cycle in their research .But involved in the relationship only between them,life cycle were paid no enough attention, which to a great extent lower theirconclusions’confidence level. Take prior literature as references, this paper willbring a moderate variable at which stage the enterprise in a life cycle into theanalysis of the relationship between stockholder’s rights-drive and earningsmanagement.This paper have adopted an empirical approach, we took these listedcompanies in the Shen, Hu Stock Market during 2008-2010 as a sample, in whichannual statement have reported the stockholder’s rights-drive plan. In theempirical analysis, firstly we evaluated now available earnings managementmeasure model, then formulated a corrected cross section model to computediscretionary accruals to measure the extent of earnings management. Andnext ,we structured a series of multiple regression models ,earnings managementas dependent variable ,stockholder’s rights-drive as independent variable, size,LOAR, ROE as control variables ,the stage at which the enterprise in the life cycleas dummy variable .and used hierarchical multiple regression analysis to examinethe life cycle’s moderate effect on the relationship between stockholder’srights-drive and earnings management .In the specific ,we grouped the companiesby the stage in the life cycle and the pattern of stockholder’s rights-drive andtested the effect which the enterprise’s different pattern of stockholder’s rights-drive at variant stage in the life cycle had on earnings management. At lastwe adopted CHOW-test to exam the moderate effect further.The results of the research have indicated the life cycle have a moderateeffect on the relationship between them. At the different stage, their relationshiphas presented some distinct characteristics. At the growth stage, it is positive, butat the mature stage, they have no remarkable correlation. Further in the way ofenterprise’s stockholder’s rights-drive, at the growth stage, the stock–option-pattern have had a stronger effect on earnings management than therestricted-shares-pattern, and at the mature stage, two have little difference.