Discussion on the Influence Mechanism of Employee Stock Ownership Plan on Company Earnings Management

Abstract

Based on the samples of A-share non-financial listed companies in Shanghai and Shenzhen from 2013 to 2019, this paper studies the impact of the implementation of employee stock ownership plan on earnings management, and finds that employee stock ownership is significantly positively correlated with the company’s accrual earnings management level. Further research shows that employee stock ownership has a significantly higher effect on upward earnings management than downward earnings management. The above research results show that the management has the motivation to ‘please’ employees. In order to make more cash out when the employee stock ownership is lifted, the management conducts positive earnings management to push up the stock price, thus damaging the interests of shareholders.