A Study On Management Compensation And Earnings Management Of Listed Companies

With the progress and completion of the Nontradable Shares Reform in Chinese listed companies, the capital market of China has developed rapidly in recent years. However, it also brought in some problems, one of which is Earnings Management. Management compensation is one of the factors which affect Earnings Management markedly, and an important part of the constrain mechanisms for Earnings Management as well.The study chooses the listed companies both in Shanghai and Shenzhen Stock Exchanges during the period though 2006 to 2008 as research samples and uses the Modified Jones Model to calculate the discretionary total accruals which will be used to measure the extent of earnings management. Then a regression model is conducted for the examination on the relationship between management salaries, management shareholding and Earnings Management.The main conclusion of this dissertation is that management salaries and management shareholding both has an significantly negative relationship with Earnings Management, which indicates that management compensation could restrict Earnings Management effectively.