| Surplus management has become one of the hot problems which have been paid great attention to in the theoretical and practical circle. For the definition, the driving factors, methods, measurement, and consequences of surplus management emerged in an endless stream, which make a theoretical contribution to identify, judge and monitor surplus management. Surplus management is the profit-regulating activities initiatively carried out by the managing staff in order to meet a certain purpose. Since the1980s of the last century, the research to surplus management has become a hot topic for foreign accounting professionals, and it has also gradually become a hot research field in China. The causes of Surplus management are communication frictions and contracting frictions. If there are no contract frictions between the shareholders and the managing staff, shareholders can understand and acquire the completely full of information in a transparent communication circumstances. Then it will not exist any information asymmetry and surplus management will perish.As to means of surplus management, For example enterprises will use the accounting policies, changes in accounting estimation, assets devaluation, non-recurring items, and related party transactions. In addition to the use of these means, financial enterprises will use some special means, such as, changing a loan time, the unjustifiable loan extension to achieve the adjustment of the loan interest income and through constantly changing provisional standard of the loan loss reservation, and through arranging logout time for loans or dead accounts to control Accounting Earnings. It also adjust profits through using derivative financial instruments.In view of the monopoly of the financial industry and dual existence of the financial managing staff, there are close links between payment of the executives and surplus management. On driving factors of surplus management, the surplus management can be used as an effective method to improve the management staff their own remuneration, which means that surplus management is an important motivation is to improve the payment of the executives. In addition, under the case that the management and ownership is separated, the existence of informational asymmetry creates favorable conditions for self-interest behaviors of executives. To maximize their own utility becomes the pursuit goal of executives’ behavior from the assumption of rational economic man. Therefore, it is a self-interested behavior for executives using accounting adjustment of profits and other means to improve their level of remuneration. Research on the relationship between surplus management and executive payment helps to understand the motive of surplus management of financial industry and the internal relations between it and executive payment.Financial fraud scandals in capital markets cause great loss to the majority of investors, such as Guangxia, Lingguang, Qiongmingyuan and Zhengbaiwen Events. Financial fraud has a close relationship with the choice abusing of the accounting policy, such as Enron, WorldCom, as well as Xerox series of financial scandals. Surplus management has become a focus issues related to financial and accounting. Listed company regulates the company’s accounting surplus through randomly changing, choosing and using accounting policies. They also regulate the company’s accounting surplus through manipulating profit and design transactions, which seriously damages the interests of shareholders in medium and small companies. The huge losses caused by it form a phenomenon which becomes market tumor affecting capital development. As an important industry to the people’s livelihood, the financial industry has its own particularity. The same surplus management behavior also exists in financial enterprises. This article attempts to explain surplus management problem in financial industry from the angle of the payment of the executives. How to regulate the implementation of payment design and thus reduce the extent of surplus management has been placed in front of regulators.The article chooses listed companies of the financial industry as the research object and studies the influence to surplus management through the normative research and empirical model analysis to payment growth rate of executives in the financial enterprises. There are lots of research on executive payment, surplus management, and the relationships between them both domestically and abroad. These researches reflect that there is a positive correlation between the executive payment and surplus management. Financial enterprises have behavior problems on surplus management, and executive payment of the financial enterprise also exists problems.Actual control of the management is the subject of surplus management, It can be seen to play the absolute dominance of the senior management of the company’s earnings management activities from scholars surplus management process. Accounting policies is the object of surplus management.Surplus management changes annual profit distribution situation. There are many reasons for the earnings management, but main motive of surplus management in financial firms is the mutual regulation of the industry, which is more significant compared to the non-financial enterprises. the supervision indicators of the financial enterprises are more stict such as current ratio,the deposit reserve ratio, the sector’s capital adequacy ratio, asset impairment reserve ratio, improve the corporate governance structure, and strict internal control. In addition, supervision of public opinion is another important external oversight than government regulation, The financial enterprises development more and more subject to the attention of the public opinion. In order to avoid violating the indicators red line of regulatory requirements, financial enterprises choose this means of surplus management.As to means of surplus management, For example enterprises will use the accounting policies, changes in accounting estimation, assets devaluation, non-recurring items, and related party transactions. In addition to the use of these means, financial enterprises will use some special means, such as, changing a loan time, the unjustifiable loan extension to achieve the adjustment of the loan interest income and through constantly changing provisional standard of the loan loss reservation, and through arranging logout time for loans or dead accounts to control Accounting Earnings. It also adjust profits through using derivative financial instruments.The problem of executive payment has always been the focus of attention of the shareholders and other investors. The world economy has been in the doldrums since the financial crisis of2008. Due to the impact of the international environment, China’s overall economic stagnated. Corporate profit growth declined. Economic growth slowed down, but in this case, the executive payment of financial enterprises also record high, which departed from the growth of the industry. The reason is worth thinking why people unprecedented focus on high payment of financial executives. It is a thinking problem whether it is reasonable for the financial industry and whether the growth rate of wages will affect surplus management.In view of the theoretical analysis and the analysis of the current situation of financial enterprises, the article empirically gives two assumptions:Fist. Financial enterprises do exist surplus management; Second. There exists positive correlation between executive payment growth and surplus management that the higher (lower) the executive payment growth rate is, the higher (lower) the level of surplus management is. In the empirical analysis, the first thing is the sample selection. Up to2011, a total of40financial enterprises listed in the Shenzhen Stock Exchange and the Shanghai Stock Exchange. Listed formula of executive payment has been exposed since2005. The article selects192samples financial enterprises listed in the Shanghai Stock Exchange and the Shenzhen Stock Exchange from2006to2011. In the study, the author excludes the incomplete data and gives design variables. There are remaining140samples. The method of overall accrued profits separation is commonly used in empirical studies. This article uses this method to assess surplus management. Firstly, using the formula:overall accrued profit=(Net profit-operating cash flow, net)/previous year total assets to calculate the overall accrued profit.Give the growth rate of total remuneration of the top three executives as an explanatory variable:This article select the growth rate of total remuneration of the top three executives as substitution variables. The growth rate of the top three executives remuneration=(total remuneration of the top three executives in year t-the total remuneration of the top three executives in t-1year)/the total remuneration of the top three executives in year t-1. In controlling variables, the article added the scale of the Supervisory Committee, the performance of the company, the proportion of independent directors three control variables as other factors affecting surplus management. Furthermore, the article select ROE as company performance, the number of supervisors as the scale of the Supervisory Committee, the number of independent directors of the Board of Directors the number as the proportion of independent directors, The next is selecting model. The author firstly checks surplus management behavior using cross-sectional Jones model and then prove the relationship between the growth rate of executive payment and surplus management by using multiple linear regression model. Finally, the author draws conclusions on cross-sectional Jones model and multiple linear regression models by using STATA software:Financial enterprises do exist surplus management; There exists positive correlation between executive payment growth and surplus management that the higher (lower) the executive payment growth rate is, the higher (lower) the level of surplus management is.The article’s main contribution is that:Fist it proves that the growth rate of the executive payment will influence surplus management. The faster the growth rate of executive payment is, the higher the degree of surplus management. Provide new clues to identify, monitor and guard against financial industry earnings management behavior. Second,Special study the article select the financial industry listed company’s executive compensation growth rate and earnings management as the object of study, but other scholars tend to weed financial industry out. And most scholars study the relationship between the amount of executive compensation and earnings management. Therefore, the article fills the study blank in financial enterprises study.The limitations of this article is to:(1) Since this study only the relationship of the executive compensation of the financial industry, the growth rate and earnings management, financial enterprises listed companies small number of listed companies of the financial sector by the end of2011, a total of only40, although the selection of six years of data, but excluding those with missing data samples only140samples for the study sample was relatively low is a defect.(2) the non-financial sector earnings management measurement process generally use the Modified Jones model used in this paper is a cross-section of the Jones model also can not discern the difference in earnings management metrics in the financial industry for both models (Some scholars in literature pointed out that the financial sector listed companies modified Jones Model NA). |
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