Equity incentives may induce opportunistic behavior of executives, which cannot align executives with shareholders and may exacerbate the agency problem. This paper examines earnings management around announcement of equity incentive plans in China by using the accrual model which incorporates control for life cycle to lower bias. We find that discretionary accruals of incentive firms is significantly negative and decreases before the announcement of incentive plan, which implies that executives managed earnings downward to decrease vesting hurdle and to conceal performance for subsequent periods. In a robust test, analysts’ consensus forecasts about earnings around announcement year are examined and are significantly overestimated. These results indicate that the downward earnings management by award firms may lead to analysts’ forecast errors.