Abstract
Equities incentive is more and more frequently used for motivating management among Chinese listed companies, but whether it will degrade informativeness of stock price, thus reduce the efficiency of capital allocation in security market remains to be verified. This article used the data of A-share listed companies in China from 2010-2014, deployed an empirical research to study the relationship between equities incentive and informativeness of stock price, considering earnings management as an intermediary variable. According to the analysis results, we found that higher level of equities incentive tended to degrade the level of informativeness of stock price, and the earnings management was not an effective intermediary variable, which meant the earnings management resulted from equities incentive was less likely to affect informativeness of stock price.
Highlights
The financial market is the core pillar of financial system, with the trader in financing institution or securities exchanges frequently exchanging currency, capital and stock with each other; resources within a society can be deployed in a more suitable place efficiently, which greatly helps to ensure the economy of a country to develop in a sustainable and well-organized way
As there are still few empirical researches providing evidence for this topic, this article bases on Roll’s method for measuring stock price information and Jones [4] model for measuring earnings management, and uses 893 Chinese A-share listed public company’s data to explore how equities incentive will directly or indirectly affect informativeness of stock price when earnings management is considered as an intermediary variable
The innovations of this article are as follows: 1) this article uses recent data of listed companies in China to confirm whether the influence of equities incentive to informativeness of stock price still exists and the consequences of the influence; 2) using earnings management to reflect the effects of equities incentive to corporate governance, this article try to figure out whether the influence of equities incentive to corporate governance will indirectly affect the relationship of equities incentive and informativeness of stock price by taking earnings management as an intermediary variable
Summary
The financial market is the core pillar of financial system, with the trader in financing institution or securities exchanges frequently exchanging currency, capital and stock with each other; resources within a society can be deployed in a more suitable place efficiently, which greatly helps to ensure the economy of a country to develop in a sustainable and well-organized way. (2016) Equities Incentive, Informativeness of Stock Price and Earnings Management: Based on the Chinese A-Share Listed Companies. Under the environment that many Chinese companies begin to take equities incentive plan as a tool to ensure better development, figuring out how these plans will directly affect stock price information, or indirectly affect it through the relation between them and earnings management will help public companies make their decisions towards incentive plan correctly. As there are still few empirical researches providing evidence for this topic, this article bases on Roll’s method for measuring stock price information and Jones [4] model for measuring earnings management, and uses 893 Chinese A-share listed public company’s data to explore how equities incentive will directly or indirectly affect informativeness of stock price when earnings management is considered as an intermediary variable
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