Executive Compensation Incentive And The Relationship Between Earnings Management Research

Executives’incentive compensation is an important governance mechanism to resolve the agency problem, meanwhile it is one of the motivations of earnings management. It has important theoretical significance and practical significance to study the relationship between the incentive compensation and the earning management.In this paper, it describes significances of this title after studying backgrounds and its current research situations in board and home being analyzed systemically, the researching frame and methods in this paper were put forward; Secondly, it go into details of the basic knowledge of executive compensation and earnings management, and analyze the relationship between executives’incentive compensation and earnings management theoretically from the viewpoint of game and completeness; Thirdly, it select SOEs and non-SOEs’historical data, using structural equation modeling to test the relationship between executives’incentives compensation and earnings management, the results show that incentives compensation can indeed trigger executives’earnings management behavior; On this basis, this paper empirically tests if the earnings management motivation created by incentive compensation can weaken the effectiveness of incentives. Empirical research covers that the governance effect will be affected if the incentive mechanism creates the earnings management behavior; Finally, based on the above findings, this paper puts forward the arrangement advices to improve the system of executives’incentive compensation and inhibit earnings management behavior.