The Study Of The Relationship Among Financial Restatement, Managerial Power And Executive Compensation

83.4% of the listed companies of monopoly industry in China are owned by the State.In these companies, the managers are always government appointed, instead of professional manager market, because there is certain relevance between the managers and government officers.On the other hand, in the situation of absence of owner and insider control, as the trustee in the principal-agent relationship, managers may influence their own compensations in the method of financial restatement to improve their compensations.Especially, when the managers have managerial power, there will be high proportion of financial restatement. So, it is necessary to pay close attention and study this theme intensively.In the base of the theories of corporate governance and science of finance,using theoretical and empirical study at home and abroad for reference, this paper chose a sample of listed companies of monopoly industry that happened financial restatement once in 2000-2009,292 samples of financial restatement totally as research object. Then, it used the method of descriptive statistics to examine the behaviors and characteristics of financial restatement with 266 samples which are rejected the samples from securities industry, bank industry and insurance industry. Furthermore, it studied the relationship between financial restatement and executive compensation under the control of managerial power, to try to explore whether managers intervene their own compensations through financial restatement. After Multiple linear regression, two duty syncretism, stock diversification, CEO belonging to dominant stockholder, CEO's tenture and integrated managerial power (it totals up the first four indexs) measured as managerial power, this paper finds that in the type of financial restatement, correction notice and supplement notice is significantly and positively related to the executive compensations both in the report period and the restatement period; while correction and supplement notice is not related to executive compensations.The result reflected the condition of indication of governance structure, weakness of supervision, lack of inhibition, which led that using managerial power, managers could manipulate the financial reports to decide their own compensation. Therefore, the listed companies in monopoly industry should improve the corporate governance structure, increase the effectiveness of governance, enhance balance force in the principal-agent relationship, and establish effective incentive and commitment mechanism to advance goal congruence between managers and companies, and to advance the accuracy and transparency of financial information. The supervisory authorities should perfect the laws and regulations of closure, accelerate market supervision, promote the market building, perfect market function, and improve punishment of financial restatement.