An Empirical Study On Incentive To Managers And Companies' Performance Based On Earnings Management

The mechanism of incentive to the managers is carried out relatively late in the listed companies in our country and the effect is not notable early. But later, as the market efficiency and the system being perfect, the effect increased. As the method to solve the problem of agency, the mechanism of incentive is favorable for the long-term development of the listed companies. However, owing to the asymmetry phenomenon of information existing, the managers will maximize their own profit by earnings management, which will make the effect of the incentive reduced.Earnings management is a behavior that managers process the earnings flexibly based on the accounting postulates in order to maximize their own interests. So, it's valuable to study the relationship between the incentive to managers and the performance of the corporate in the listed companies. On the bases of the theory, this paper uses 2778 data from 2006 to 2009 to do an empirical research, The analysis reveals that:1,The level of managers'salary and shareholding has the positive effect to the company's performance. The incentive to managers is useful.2,Incentive to managers stimulate managers on earnings management, the higher level of managers'salary and shareholding, the higher level of earnings management .3,There exists a negative correlation between earnings management and the company's performance. As a method to maximize self-interest, earnings management has a harm to the company's performance.The method of the incentive is divided into two parts: the salary and the shareholding. This paper researches the two method and compare which has the bigger impact to the earnings management and company's performance, and conclude that: As a method of incentive to the managers, salary incentive is more advantageous to the development of the company.Finally, this paper summarizes the conclusion. According to the results of the study and current situation, this paper takes effective measures to carry out the mechanism of incentive to the managers, reduce the earnings management and improve the performance of the company.