Research On The Relationship Between Executives Compensation And Real Earnings Management In Listed Companies Based On The Theory Of Managerial Power

Earnings management has always been the focus of research on listed companies,compensation is one of the important motivations of earnings management and the theory of managerial power is an important basis to explain executive pay level, pay structure and its change.With the emergence of accounting scandals at the beginning of the21st century, laws and regulations like sarbanes-oxley has been promulgated,which standardize the accounting environment. And in response,the enterprise accounting behavior is from accrual earnings management towards real earnings management,hoping to maximize the interests of individual.This article studies the relationship between executives compensation and real earnings management from the perspective of managerial power,dividing executives compensation into monetary wages and equity compensation,selecting the data of Shanghai and Shenzhen stock market A-share listed companies from2008to2012, using Roychowdhury model to measure real earnings management.The results of this paper show that the total level of executives compensation, monetary compensation and equity compensation is all significantly negatively correlated with real earnings management. That is to say,managers own too much power and win the opportunity to profit-seeking,which leads the indirect method real earnings management no longer the best choice.For myopic managers,they has already got reasonable and satisfactory returns in management.There is no need for real earnings management.For the visionary managers, they focus more on the future development of the enterprise.Real earnings management can pull up surplus in the short term, but does harm to the long-term value of the enterprise,so it needs to be suppressed.In our country, studies on the relationship between executives compensation and earnings management are mostly based on agency theory, less involved in the theory of managerial power. The innovation of this paper is from the perspective of managerial power to explain the relationship between executives compensation and real earnings management. We hope that this artice can enrich research contents of real earnings management in China, to prevent、 identify and govern real earnings management,to safeguard the interests of stakeholders and standardize the operation of market.