The Influence Of Equity Incentive Plan On Earnings Management Behavior Of Companies

The principal-agent problem of modern enterprises is a hot issue in the field of corporate governance.In order to solve the principal-agent problem of the company,the equity incentive tool has emerged.Equity incentive began to be applied in china until 2006,but the understanding of equity incentives in the early stage is still in a vague sense.In order to standardize China's equity incentive system,the CSRC and the ministry of finance have issued a number of relevant documents to gradually guide listed companies to implement the application of equity incentive plan.As equity incentive is more and more widely used in Chinese enterprises,a series of new problems have emerged,among which the most important is the earnings management behavior of the management.Since the establishment of the equity incentive system,scholars from different angles on the great deal of research,while research on equity incentive,but the literature mainly focused on its design flaws and economic consequences,paid little attention to the side effects brought by the equity incentive,namely the earnings management behavior of management.In recent years,a small number of scholars have begun to pay attention to it,but they mainly adopt the method of empirical research.This paper intends to analyze the specific incentive scheme of the case company and discuss the influence of the implementation of equity incentive on the earnings quality of the company through the method of double-case comparison.On the one hand,it can enrich the existing research literature;on the other hand,it can more deeply find the problems existing in the implementation of equity incentive plan with strong practical significance.On the basis of literature review,this paper takes E-Hualu and iflytek as examples to explore the influence of equity incentive under different incentive levels on earnings management.According to the degree of incentive,this paper divides the equity incentive plan into two dimensions,and divides the equity incentive plan into "incentive" and "welfare" according to the incentive conditions and the exercise period,so as to deeply analyze the influence of the equity incentive plan under different types on the earnings management behavior of the company.This paper adopts the mean reverting accrual method to measure the earnings management behavior of the case company.Through the comparison,it can be concluded that :(1)there are earnings management behaviors in the process of incentive and welfare equity incentive;(2)before the announcement of the equity incentive plan,enterprises will implement downward earnings management methods to reduce the difficulty of exercise;After that,a series of earnings management behaviors will be implemented to achieve incentive conditions,so as to obtain high equity returns.(3)before the base period,the degree of earnings management of the welfare equity incentive is higher than that of the incentive equity incentive;During the exercise period,the degree of earnings management of incentive equity incentive is higher than that of welfare equity incentive.(4)the difference in the setting of equity incentive elements is the main reason for the large degree of earnings management of incentive equity incentive.In addition,corporate governance structure and equity concentration also affect the earnings management behavior of the managementThis paper puts forward several Suggestions on restraining the earnings management behavior in the equity incentive plan of listed companies :(1)for listed companies,the key factors such as incentive object,grant quantity,incentive mode and unlocking condition should be considered to reasonably and scientifically design the equity incentive plan;at the same time,improve the company's governance structure,build a sound system,strengthen the supervision role of the internal audit department.(2)for government departments,should improve the relevant equity incentive system and related accounting standards,and strengthen the supervision of relevant departments.The shortcoming of this paper is that the first-hand data is not obtained,and the research conclusion may have a certain one-sidedness.At the same time,only two case companies were selected for comparative research,and the conclusions will have certain limitations.