Research On The Relationship Between Equity Incentive And Earnings Management

As a long-term incentive mechanism,equity incentive is an impor tant part of corporate governance mechanism to solve the prob lem of principa l agent in mode rn enterprises.However,equity incentive is a double-edged sword for C hinese listed companies.On the one hand,the equity incent ive can link the interests of mana gement and the interests of the enterprise together,produce the benefit convergence effect and reduce the agency cost.On the other hand,based on the information asymmetry theory,the equity incentive will produce opportunistic behavior effect,prompting the management to induce the accrued earnings management and real earnings management behavior to maximize the self benefit,damaging company value.The relationship be tween equity incentive and earnings management is influenced by both effects.Enterpr ises show different characteristics in different life cycle stages,the intensity of interest convergence effect and opportunistic effect on the equity incentive also change,which may lead to the possible different relationship between the equi ty incent ive and the earnings management.Under the unique political and economic environment of our country,the study of the relationship between equity incentive and earnings management in different enterprises life cycle can reveal the accrued earnings management and the real earnings management of the management under the incentive system of equity incentive system.It is great signi ficance to prevent and control executive earnings management and play the convergence effect of equity incentive.On the basis of comprehens ive combing of equity incentive,earnings management,business life cycle related theories and research results,this paper puts forward research hypotheses according to the characteristics of different enterprises' life cycle stages and selects listed companies as sample for 2012-2016 years' implementation of equity incentive plan in C hina,using the cash flow combination method to sample the samples.It is divided into two groups of growth and maturity.Based o n multiple factors of equity incentive scheme,the relationship between equity incentive and earnings management is analyzed in different enterprise life cycle stages.The results of this study show that:In the growth period,the degree of equity incentive is positively related to the accrued earnings management and real earnings management;the length of equity incentive is not significantly related to the accrued earnings management and the real earnings management level;and the stock option model is more likely to lead to the management of the earnings management and the real earnings management.In the mature period,the degree of equity incentive is significantly positively correlated with the accrued earnings management,which is significantly negatively related to real earnings management and negatively related to the overall earnings management;the length of equity incentive is significantly negatively related to the accrued earnings management and the real earnings management level;the impact of stock option and restricted stock model on earnings management has little difference,and the use of stock option model more restrictive stock options can inhibit the real earnings management behavior of management level,thus restraining the overall earnings management level.Based on the conclusions of the research,this paper puts forward some pertinent suggestions to the enterprises in the growth period and the mature period,in order to provide guidance for C hinese listed compa nies to use the equity incentive mechanism reasonably and curb management earnings management behavior.