Executive Compensation, Managerial Power And Earning Management

In recent years, excessive executive compensation in listed companies has attracted the public attention more than ever,and excessive executive compensations in some state-owned listed companies are always outstanding issue. In the context of the global financial crisis, many executives of state-owned enterprises pay rise largely, other than decreasing, is constantly arouse public doubt. Senior management incentive problem is one of the core issues of corporate governance, and a good incentive contract mechanism can effectively alleviate the company's principal-agent conflicts, which can lead self-interest of senior management in line with the interests of outside investors. Large amounts of domestic and international literature indicates that executive pay incentives can not completely solve the agency problem, the formulation and implementation of compensation incentive mechanisms may make it a part of the agency problem. Especially, managers may use their power to influence the board or seeking to obtain compensation from the board, and ultimately, reduce the effectiveness of incentive pay.Based on the theory of the optimal contract and managerial power, we refer to two sets of assumptions, which influence executive pay in the state-owned listed companies. In this paper, we process the empirical test through Shanghai and Shenzhen Stock Exchange 178 state-owned listed companies from 2003 to 2009 panel data. We design indicator system of managerial power, whether the top-manag er are a member of board, ownership structure, the general manager tenure, and whether the general manager was a member of holding shares corporate. In the empirical study, we use the ordinary least squares method to estimate and make a sound test by mathematical statistics and econometric models. The results show that executive compensation is related with their performance in the state-owned listed companies, but less affected. the management of power is an important factor in incentive pay, and CEO in the state-owned listed companies determine their pay themselves. Specifically, the executives maximize their own interests by uppering below-the-line accruals, and earnings management is one path, by which CEOs raise their pay. Rise in executive pay levels reflects that, companies with the large-scale and complex enterprise operations are more willing to pay higher salaries.