Astudy On The Executive Compensation Incentive And Earnings Management Of The Listed Companies

The improving and perfecting the system of our socialist market economy takes theestablishing of modern enterprise system by listed Corporation. Meanwhile, theseparation of ownership and management rights between shareholders and executives ofthe listing Corporation from principal-agent relationship are dominated. the compensationincentive and earnings management highlight the problem.The paper discussed the executive compensation, payment, differences ofcompensational morphology which leads to executives on the company’s incomesadjusted managemental motivation according to the principal agent, contract theory,asymmetric information theories. The hypothesis was that the higher of the executive paylevel was, the higher the degree of earnings management executives shareholding was.The higher of the ratio leaded to the higher the degree of earnings management.Theextent of earnings management was higher than the motherboard GEM ListingCorporation. Therefore, we chose1013companies from mainboard A shares of China in2012, as well as the gem273executive compensation, earnings management andcorporate size, assets and liabilities rate, the rate of return on net assets and other controlvariables, were tested by multiple linear regression method, especially compared toverification between the board and the gem executives, ownership and earningsmanagement. Our empirical study resulted that the executive compensation is one of themotivations of earnings management owing to the high correlation between them. Thesignificant correlations were between the implementation of equity incentivecompensation and earnings management, there are differences between the main boardand GEM Listing Corporation in executive compensation and earnings managementrelationship.Following the conclusion, we suggested that the executive compensation incentivemechanism should be optimizational designed, governance structure of the listingCorporation should be perfected, the accounting standards and the accounting system andthe implementation of the inspection should be improved, executive compensationmechanism of supervision and information disclosure should be specificated. Thepackage of countermeasures and proposals, with relevant change into listing Corporationexecutive compensation and earnings management were discussed.The empirical study of the differences of earnings management, the gem and the mainboard market in salary incentive and earnings management has certain novelty compared to the relative papers. Yet the factors affecting the company executive compensation andearnings management are emerged, the further researches are required.