The Impact Of Incentive Stock Option On Earnings Management

If two rights separation of ownership and managerial authority of the corporate governance structure make conflicts of the interests of shareholders and managers,managers lack interests and motivation for shareholders.Through on-the-job consumption, managers are motivated for their own interests to take opportunism behavior.Shareholders and managers of this relationship is actually a kind of principal-agent relation.The Incentive Stock Option system is considered to be the effective way to solve the principal-agent.However the outbreak of the "Enron event" made the effect of incentive Stock Option questioned. The incentive Stock Option plan is still not change the fact that the contract relations. In recent years, scholars at home and abroad to notice the earnings management of listed companies which published draft Incentive Stock Option plans. So in this article we base on the perspective of earnings management, studying equity incentive for further research.In recent years, the widespread application of equity incentive mechanism in listed companies in our country, both has brought the positive role and also caused negative problems.Therefore, studying the equity incentive and earnings management can reduce the negative effect of equity incentive.Strengthen its positive role not only has theoretical significance, but also has strong practical significance.On the basis of the literature review, the research on the fundamental information resources accounting theory is carried out. Study incentive-driven companies and the welfare-driven companies has different effect for real and accrued earnings management of listed companies.The samples of this article is draft Incentive Stock Option plans of listed companies which mainly published from January 1,2005 to December 31,2013. The method of this paper is the use of descriptive statistical method and multiple linear regression,studying the impact of Incentive Stock Option for earnings management of listed companies.Firstly, earnings management of listed companies can be divided into real earnings management and accrued earnings management,and compared draft Incentive Stock Option plans of listed companies with which not published at the same time of 311 listed companies in comparison. Studying if they has different effect for real and accrued earnings management of listed companies.The study found that:in the quarter prior to the announcement of Incentive Stock Option plans, listed companies is down to reality and accrued earnings management. Secondly,the draft Incentive Stock Option plans of listed companies can be divided into the incentive-driven companies and the welfare-driven companies,studying if the incentive-driven companies and the welfare-driven companies has different effect for real and accrued earnings management of listed companies.The study found that:Relative to the incentive-driven companies, the welfare-driven companies tend to downward accrual earnings management.Relative to the incentive-driven companies, the welfare-driven companies tend to downward real earnings management. This paper further confirmed that Incentive Stock Option of the listed Companies has he incentive-driven companies and the welfare-driven companies.This will provide more reference for the enterprise to make Incentive Stock Option plans and for investors to make investment decisions.Structure of this paper are arranged as following:firstly, in the introduction, this article introduces the background of selected topic and the significance of research, the purpose of research and the content,the ideas of research and the methods,as well as the innovation.In the second part,first of all,it reviews related literature about the effectiveness of equity incentive,secondly,it carries on the research of earnings management,finally,it introduces the relevant literature about the relationship between equity incentives and earnings management.In the third part,it introduces the related theory of equity incentives and the related theory of earnings management,as well as it introduces the logical analysis of the equity incentive impact on earnings management,lastly it puts forward the assumption. In the fourth part,it introduces the selection of sample and data sources, the design of the variables and the model.In the fifth part,using of descriptive statistics and multivariate linear regression come to empirical results. In the sixth part, the full text is summarized, and put forward the limitations, and put forward some suggestions.