China's State-controlled Listed Companies In The Management Of Pay, Equity-based Incentives And Earnings Management

By ten years of development, Chinese stock market has already developed from theinitial information market gradually to reason. The accounting earnings revealing tothe public becomes the important information source for investors to carry outinvestment decision. In addition, the earning information is the important parameterof many contracts and stock market controls. And benefits correlations are extremelysensitive to the profit or the loss. For the importance of the earnings information, onthe one hand, the managers have the motivation to manage it. On the other hand,many specialists are included in studying the affecting factors of the earningsmanagement and trying to find a way to solve it. As to State-controlled listedcompanies, under its special governance structure, the managers hold the managementand decision-making, and have motivations of earnings management for their benefits.Standardizing the earnings management performance is so important an issue that isworthy to be paid attention. All these show that the study of this topic is boththeoretical and practical. This paper would study the relation of managementincentives and earnings management of State-controlled listed companies.This paper uses the State-controlled listed companies listing on Shenzhen A share from 2005 to 2006 as the research sample, deleting ST, new listed and data missing companies. Methodically, after comparing and evaluating the methods of measuring earnings management in abroad, this paper chooses modified Jones Model to calculate the Discretionary Accruals, which is used to represent the earnings management. Then this paper examines systematically the relationship between management compensation incentive and earnings management, Equity-based incentives using Liner Regression Analysis.Through analysis of the regression result, I find: annual compensations of senior managers and earnings management present remarkable positive correlation. Annual compensations and short-time achievement get in touch, apt to lure manager's short-time acts. In order to pursue their own interests and get more compensation, the motive of earnings management for short-time compensations incentives is obvious. Senior management of shares held has a positive correlation with earnings management. This shows that managers in order to its own interests will be the future of the accounting period to the current revenue recognized in advance. Earnings management has a positive correlation with the assets scales; and a negative relationship with debt ratio; a significant negative relationship with managerial expense. In the last part, I conclude the results and give some advices...