Study On The Impact Of Fair Value Measurement On Executive Compensation Contract Of Listed Companies

Reasonable and effective executive compensation contract can take fulladvantage of the information obtained by enterprises to measure the endeavor of theexecutives and reduce the cost of measurement. Nowadays, executive compensationare linked up with company performance by listed companies in China. Comparedwith market performance, listed companies are more willing to set accountingperformance as the formulate basis of executive compensation contract. Fair valuemeasurement was introduced to the new Corporation Accounting Standardimplemented in2007, which is the shock to traditional accounting performance. Thechange may require a remeasurement for the effort of executive. Hence, this thesisaims to examine the influence of fair value measurement on executive compensationcontract.Firstly, this paper presents the documents about fair value and executivecompensation both at home and abroad and elaborates their interpretation in relevanttheory, we analyze how fair value measurement influences executive compensationcontract on this basis and propose the research hypothesis. Secondly, we confirm theresearch hypothesis by collecting documents, structures the enterprise’scomprehensive performance indicator and introduces non-parametric test method andbuild multiple regression model. Thirdly, the thesis selects A-share non-financiallisted enterprises in Shanghai and Shenzhen from2007to2011as research sample andinvestigates how the variation of the two kinds of fair value affects executivecompensation and sensitivity of performance-related compensation. This article testsand verifies the research hypothesis through non-parametric test and multivariateregression analysis investigates the usefulness of fair value measurement in China’slisted companies and the rationality of the design of executive compensation contract.After the analysis with the solid evidence, this study find that fair valuemeasurement of listed companies have indeed affected executive compensationcontract. The listed companies adopting fair value measurements raise executivecompensation; the variation of different fair value has different influence on executivecompensation and sensitivity of performance-related compensation; the variation ofaccounting information statement and the character of the enterprise’s property rightsinfluence the relevance between fair value measurement and executive compensation; the coherent characteristic of executive compensation continues to exist after usingfair value measurement. China’s listed companies according to this information toadjust executive compensation contract is not scientific and corporate governancemechanisms do not play its role. Aiming at the above problems, This paper putsforward the suggestions to raise the applying quality of fair value information andcomplete the policy of executive compensation contract.