The Study On The Relationship Between Compensation And Earnings Management In Listed Companies

From the rapid development of China's securities market in the decade of the 20th century, the information disclosure of listed companies has always been the concern of all parties, particular the problem of earnings management. Some domestic scholars have begun their system study. However, most of these studies are based on the consistency of management's interests and business interests; those only based on management's own interests is very few. This paper draws on research achievements at home and abroad, first of all, theoretically analyze the relationship between the executive's compensation and earnings management; and then in light of China's actual situation of listed companies, analyze how Managerial Power affects the relationship with the introduction of Managerial Power; and then using the analysis of the empirical method found: The greater the Managerial Power, the less relative between executive's compensation and earnings management. This is because the expansion of managerial power makes the executives have greater autonomy or influence related to the design of the pay, the increase of the lease space relatively reduces the level of earnings management based on the compensation. This shows that when being lack of management supervision and balances of power, the company's incentive and restraint mechanisms will fail. Therefore, finally this paper makes the corresponding policy recommendations.