The Impact Of Employee Stock Ownership Plan On Earnings Management

In June 2014,the Securities Regulatory Commission issued the Guiding Opinions on the Trial Implementation of Employee Stock Ownership Plan for Listed Companies,which enabled the development of employee stock ownership plan in the direction of standardization and institutionalization,marking a new stage of development of China’s employee stock ownership plan.With the rapid development of China’s capital market and the gradual improvement of various functions,while capital market making great contributions to social and economic development,there are also listed companies that carry out earnings management for the motives of IPO,avoiding losses and reducing tax burden etc,which have certain impact on the quality of financial information of listed companies.The strong incentive effect of the employee stock ownership plan on employees can stimulate the enthusiasm of employees to participate in corporate governance and carry out good supervision and restraint on management to a certain extent,so as to improve the company’s internal governance mechanism.Therefore,it is important to study the impact of employee stock ownership plan on earnings management from the perspective of internal corporate governance.Based on the financial data of Shanghai and Shenzhen A-share listed companies from2014 to 2020,this paper uses empirical research and literature research methods to conduct theoretical analysis and empirical research on the impact of employee stock ownership plans on earnings management.Firstly,based on the elaboration of principal-agent theory,dualistic economic theory and stakeholder theory,the paper systematically sorts out and summarizes the relevant literature in this field,and briefly analyzes the current situation of implementing employee stock ownership plan in listed companies in China.Based on the influence of employee stock ownership plan on earnings management,the equity structure is divided into equity concentration and equity nature,and the influence of employee stock ownership plan on earnings management in companies with different equity concentration is investigated by introducing the cross-product term of employee stock ownership plan and equity concentration in the model.Further,according to the equity nature of the sample companies,it is divided into state-owned enterprises and non-state-owned enterprises,and the influence of employee stock ownership plan on earnings management in companies with different equity nature is studied.Thus,the moderating effect of equity structure on both is explored.Finally,the surrogate variable measurement method and the propensity score matching method are used to test the robustness.It is found that there is a significant negative relationship between employee stock ownership plan and earnings management,and the implementation of employee stock ownership plan can inhibit the earnings management of listed companies;there is also a significant negative relationship between equity concentration and earnings management,and the negative relationship between employee stock ownership plan and earnings management will be weakened to a certain extent in companies with higher equity concentration;the employee stock ownership plan of non-state-owned enterprises will have a more inhibitory effect on earnings management.According to the results of the above study,encouraging listed companies to implement employee stock ownership plans and improving the corresponding laws and regulations not only have a strong incentive effect on employees,but also can give full play to the internal governance role of employee stock ownership plans,which can play an important role in improving the economic efficiency and the quality of financial information of enterprises.Through this paper,I hope to supplement the relevant theoretical literature on employee stock ownership plans and earnings management,and provide reference for further improvement of internal governance of listed companies.