CEOs And CFOs:who Have The Most Influence On Earnings Management?

The"listed companies equity incentive management measures (Trial)"promulgated and implemented by the Commission In2005,the" state-owned holdinglisted companies (domestic) the implementation of equity incentive measures" and "Implementing of equity incentive method in state-owned holding listed companies(outside)",officially promulgated by the State-owned Assets SupervisionCommission, at the end of share-trading reform in2006mark the beginningextensive promotion of the stock ownership incentive mechanism in China. CEOsand CFOs who are business executives have the important influences on variouseconomic activities of enterprise has. Some time ago, that many companies appear "salary" attracts the attention of academia and regulators on equity incentive.Based on the principal-agent theory and the compensation contract theory,thispaper studied CEOs and CFOs’ equity incentive degree on the impact of earningsmanagement on CEOs and CFOs, and discussed whether equity incentive can inhibitthe executives to earnings manipulation of motivation.In the background of ourcountry, whether the influence of two executives equity incentive to earningsmanagement are differences,；In the different nature of property right, whether CEOsand CFOs’ equity incentive effect has differences.Under China’s special background and the data of2007to2010of listedcompanies, this paper makes a empirical analysis, the relationship between CEOsand CFOs’ equity incentive and earnings management of the state-owned and nonstate-owned holding listed companies will be contrasted, we reach the followingconclusion:First, CEOs’ equity incentive of the state-owned can induce more earningsmanagement behavior, and is positively related to earnings management. Nationaldesignated finance director who is stronger independence, but as a result of thedefault of the financial chief system which is not reach the ideal effect, CFOs’ equityincentive and earnings management level does not exist significant correlation. Inthe state-owned enterprise, CEOs’ equity incentive effect on earnings managementis better than that of CFOs’ equity incentive effect.Second, CEOs and CFOs’ equity incentive of the non-state-owned can induce more earnings management behavior, and is positively related to earningsmanagement. By contrast of the correlation coefficient, CEOs’equity incentive effecton earnings management in the non-state-owned is better than that of CFOs’ equityincentive effect.Third, CEOs and CFOs are granted equity incentive in listed companies, boththe rights will be mutual diversion and mutual supervision, will play a positive rolein company earnings quality. The influence of that CFOs’ equity incentive weakenedthe strength of CEOs earnings manipulation in the state-owned is better than that ofCFOs’ equity incentive influence in the non-state-owned.This study will provide the beneficial supplement for the research of thecorrelation of,the existing executive equity incentive and earnings management,aswell as make effective suggestion for listed companies equity incentive system.