The Study Of The Relationship Between Financial Restatement And Executive Compensation

Annual financial statements are one of the most important information sources for investors to learn corporate financial position and operating results, whose credibility and relevance are paid attention to all the time. However, in recent years, the behavior of restatement is happening with increasing frequency, which deeply reduces the information quality of financial reports, and even more, shakes the confidence of the whole investors.This paper mainly researches on the relationships between financial restatement and earnings management, which expands the observation view of existing literature about financial restatement. Firstly, this paper uses normative methods to define the financial restatement and accounting error and to make an in-depth study about the information of listed companies' financial restatements. Secondly, this paper uses empirical research methods to study the relationship between financial restatement and executive compensations, results show that:the compensation of directors and managers has the most influence on the financial restatement, while the management equity ratio is not so much related. The results reflect that:as an important part of corporate governance, incentive system would promote managers to do their duty, and then, the quality of financial statement could be guaranteed.