The impact of anti-corruption measures and risk effects on equity incentives and financial misreporting in China

This study examines the effects of anti-corruption and equity incentive risk on financial misreporting in the context of China’s unique corporate ownership structure and governance regime.Using a sample comprising 2,708 cases of financial restatement over the 2007-2017 period.Our key findings suggest that managers’shareholdings are significantly and positively associated with their firms’financial misreporting,and certain equity risk factors dramatically alter Chinese corporate governance.Furthermore,managers’motivation to misreport is significantly more pronounced in non-state owned enterprises(nonSOEs),suggesting that equity incentive risk effects mitigate the"absence of ownership"problem believed to affect SOEs.Managers in highly competitive industries and firms with low institutional ownership are found to be highly motivated to misreport performance.

Upholding Justice while Pursuing Interests:Community-Based Labor Sharing Incentive of Chinese Classical Enterprises-A Case Study Based on Shanxi Merchants Qiaojiazihao

The modern equity incentive system,which takes shareholders’interests first as the logic of governance,is based on material reward and short-term behavior,making it difficult to fundamentally build an economic interest community between enterprises and employees.How to avoid opportunistic behavior in equity incentive and stimulate employees’prolonged sense of organizational identity for enterprise sustainability is an important governance problem of modern enterprises.Based on the theory of social embeddedness,this study uses constructing grounded theory to explore the incentive theory of Qiaojiazihao,which means an exceptional family business owned and run in Shanxi Province but well known throughout China by a family surnamed Qiao in the Qing Dynasty.Qiaojiazihao takes the Confucian community thought as its foundation of social values,the Confucian concept of righteousness and interests as its business ethics,and the social factors,such as emotion and trust,are embedded in its economic organization.The labor sharing incentive thus forms the pathway to Geo-cultural community-social identity community-economic interests community.On this basis,it abstracts the internal mechanism of value generation-system coupling-interest strengthening as the logic of the community-based labor sharing incentive of Chinese classical enterprises.This study deepens the understanding of the equity incentive system of Chinese classical enterprises,and is enlightening for revising the institutional logic of rational calculation of equity incentive based on material interests and improving corporate governance and employee shareholding methods from the perspective of social embeddedness.Therefore,this study is helpful to understand the role of employee incentive in securing for employment stability,comprehensiveness,and loyalty.

Agent's Optimal Compensation Under Inflation Risk by Using Dynamic Contract Model

This paper studies the problem of principal-agent with moral hazard in continuous time.The firm’s cash flow is described by geometric Brownian motion(hereafter GBM).The agent affects the drift of the firm’s cash flow by her hidden effort.Meanwhile,the firm rewards the agent with corresponding compensation and equity which depend on the output.The model extends dynamic optimal contract theory to an inflation environment.Firstly,the authors obtain the dynamic equation of the firm’s real cash flow under inflation by using the It?formula.Then,the authors use the martingale representation theorem to obtain agent’s continuation value process.Moreover,the authors derive the Hamilton-Jacobi-Bellman(HJB)equation of investor’s value process,from which the authors derive the investors’scaled value function by solving the second-order ordinary differential equation.Comparing with He;,the authors find that inflation risk affects the agent’s optimal compensation depending on the firm’s position in the market.