Study Of The Influence Produced By The Fair Value Measurement On Executive Compensation Contracts

Accounting performance has always been the principal standard to measure senior executive’s efforts in remuneration contract design of senior executive in our country. The Ministry of finance of PRC has issued "accounting criteria for enterprises"(2006) to introduce fair value calculation attribute. Since then, the profit and loss on fair value calculation has become an indispensable portion of the performance of listed companies. This will influence the design and effectiveness of executive compensation contracts.This paper regard accounting measurement function as the starting point to study the fair value calculation’s influence on senior executive remuneration contract. This paper adopts the research method of combining the theory and empirical analysis, qualitative and quantitative analysis, the dynamic and static analysis. Theoretical research part contains combing out and summing up the previous research, constructing the analysis framework on the foundation of agency theory and accounting contract theory. Points out that the use of fair value, on the one hand, enrich the content of information in the accounting performance, that the outcome of the efforts of. executives more timely and accurate to come out now, can effectively enhance the executive compensation, the positive incentive contracts; on the other hand may also become a executives realize own benefit maximization means for the executives surplus manipulation and laziness behavior to provide new space and excuse, reduce the constraints of executive compensation contract role. In the empirical research part contains selecting A-share nonfinancial firms affecting by the fair value measurement2007-2010as the sample, establishing the salary-performance sensitivity model and viscous model, compared with other surplus project,testing the the sensitivity and asymmetric of the salary to surplus measured by fair value and on the control of related variables. The empirical results show that after introducing the fair value, executives compensation contracts appeared adjustment, but adjustment is not fully; incentive effect increase but constraints reduces; the listed company executive compensation contracts in the fair value accounting information use limited to the income statement, and ignore the recorded in the capital reserve the changes in the fair value, in2009the income statement after the reform, this phenomenon is also failed to change.There are two possible innovation points in this study. First, bring in " profit changes measured by the fair value recorded in the capital reserve " in the research scope, then investigate the influence on executive pay, and focus on the income statement in2009before and after the reform whether have change, in order to test the fair value measurement in accounting performance on executive pay effects are shown for statements in different position and different. And second, the research fully consider the the influence of financial crisis in capital market of China, select reasonable sample and data, evaluate the influence produced by the fair value measurement on executive compensation contracts.