An Empirical Analysis Between Equity Incentives And Earnings Management Based On Enterprise Life Cycle

Equity incentives as a kind of important compensation mechanism of incentive management authorities for a long time, combining the companies’ performance with the compensation of organic managers, allowing the managers to participate in the enterprises’ operation and management as the owners of the companies, sharing benefits and risks, they can alleviate the principal-agent problems, finally realize the increasing in the value of the companies, but sometimes they do not play incentive effect, based on the information asymmetry, they lead to managers using the opportunistic financial reporting effect for their own benefits. Therefore, equity incentives can show interest alignment effect, also can show opportunistic financial reporting effect. In recent years, due to earnings management behaviors, they lead to a lot of companies being issued non-standard audit reports by certified public accountants, make scholars at home and abroad be interested in the relationship between equity incentives and earnings management.The innovation point of this essay is that, at present the scholars who study earnings management are mainly defining the accrual-based earnings management, ignoring the real earnings management, in order to fully understand the relationship between equity incentives and earnings management, this paper combines two types of earnings management, makes the results more comprehensive. And enterprises in different life cycle phase will show the different life cycle characteristics, different incentive policy for different stages, to effectively curb the earnings management behaviors of managers, this article will combine enterprise life cycle, equity incentives and the accrual-based or real earnings management, from a life cycle perspective, discuss the relationship between our country listed companies’ equity incentives and the accrual-based or real earnings management, according to different life cycle stages, the article may put forward the reasonable countermeasures and suggestions.Based on literature review and theoretical analysis, according to the characteristics of the different enterprise life cycle, the article puts forward the research hypothesis, selects equity incentive plan proposed by China in 2010-2014 a-share listed companies, divides into two groups of samples, the growth companies and the mature companies, establishes a multivariate regression model, analyzes empirically the relationship between equity incentive and the accrual-based or real earnings management. In this paper, the research results show that the companies in growth, they are a significantly positive relationship between equity incentive and the accrual-based or real earnings management, opportunistic financial reporting effect dominates; In the mature companies, they are a significantly positive relationship between equity incentive and the accrual-based earnings management, opportunistic financial reporting effect dominates, they are a significantly negative relationship between equity incentives and real earnings management, alignment effect dominates. The research conclusion, for the different life cycle stages of listed companies, it provides an efficient and reasonable improvement measures for equity incentive, makes the incentive alignment effect.