A study of Manager’s Compensation and Earnings Forecast Revision
|關鍵字:||財務預測;高階經理人獎酬;股票分紅;員工認股權憑證;Earnings forecast;Manager’s compensation;Stock bonus;Stock option|
The separation of ownership and control in modern enterprise causes the principal-agent problem. Those managers attempt to maximize their own profit instead of shareholders’. In order to align managers’ incentive with those of shareholders, performance-based compensation is developed. The main part of it is equity-based compensation. The percentage of equity-based compensation of the managers has been increasing dramatically in these years. Performance-based compensation has been solved part of the agency problem. Many researches suggested that there is a positive relation between CEO’s compensation and company’s performance. However, will the managers with higher incentives engage in manipulating earnings forecast to enhance stock price instead of managing the corporation？ The purpose of this paper is to study if the top managers’ self-interest incentive will influence the corporate to take aggressive earnings forecast, and to examine the effect of managers’ different composition of compensation on earnings forecast revision. We examined 382 samples of listed company that issued stock option and the research period is from 2003 to 2004. The 382 samples were divided into two groups based on if the earnings forecast was revised downward. The empirical results can be summarized as follows： 1.The relative compensation of revised group is higher than the un-revised group. 2.The relative Stock bonus in revised group is higher than the other group. 3.It makes no significant difference if owning higher relative vested stock option or unvested stock option in two groups. 4.The relative sensitivity of equity-based compensation is higher in revised group than in un-revised group. Based on the above results, the connection between top managers’ reward and the stock price of company is very possible to cause those managers to influence stock price by manipulating earnings forecast instead of putting efforts on managing company. Related authorization and stakeholders should concern this kind of situation.