Research On Correlation Between Two Types Of Pofit And Loss From Fair Value Changes And Executive Compensation

The fair value of the measurement model were drew into the Accounting Standardsfor Enterprises in2007, which led to huge structural changes in earnings. Companyprofits usually represents management’s effort level and management ability, which isone of the important reference index of executive pay. Managers take use of theindependent selectivity of fair value policy for profits and increasing their pay. On June12009, The Ministry of Finance issued Accounting Standards for Business Enterprises No.3Explain to introduce other comprehensive income, to reset the applied position of thethe profits and losses from fair value changes. This paper trys to find if the behavior hascorrelation between gains and losses from fair value changes and executivecompensation.Fistly, Based on the relevant research results of scholars at home and abroad, therelated theories are analyzed. Secondly, raise the hypothesis based on the analysis ofrelated theory. Finally, Based on samples of the changes in fair value in A-share listedcompanies from2010to2011, this essay focus on the study of the impact of fair valuemeasurement on executive compensation. The main conclusions are: Changes in fairvalues recognized in the gains and losses are significantly associated with executive’scompensation, the profit and loss from fair value changes included in capital surplusshow no significant correlation, this indicated that companies pay more attention to theincome statement. In the samples of fair value negative changes included in capitalsurplus, the changes show a significant positive correlation with executive compensation.The interpretation of2009accounting standards reform plays a certain role in easingheavy reward and light punishment, which still exists in samples of Changes in fairvalues recognized in the gains and losses. The authenticity of the surplus net of changesin fair values on the impact of executive compensation is stronger than the changes infair values. The executive’s compensation in China has yet to be improved.