| The China’s Ministry of Finance introduced fair value accounting into China in2006and the new Accounting Standards for Enterprises implemented in2007. The new introduction of fair value caused great changes in financial statements of China. Convergence with the international standards gives policy support for the internationalization of companies. Chinese companies face new opportunities and challenges.Changes in fair value gains and losses are included into income statement. Listed companies should disclose gains and losses from fair value changes in financial assets held for trading, derivative instruments, investment real estate, etc. Profit and Loss from Fair Value Changes gradually became an important part of company performance. Enterprise is not a complete contract. As a new kind of measurement, fair value plays a positive role in maintaining contract fair and improving contract efficiency. Executive compensation contract is an important tool and is aimed to solve agency problems between shareholders and managers. Efficient executive compensation contracts can effectively use available information to measure the level of senior executives’ efforts. Therefore, as fair value measurement being introduced, intensive study of the fair value measurement’s consequence on executive compensation contracts has a theoretical and realistic significance.The implementation of new Accounting Standard is certain to have an important impact on the performance of listed companies. Chinese companies have a wide application area of fair value. It may have broad impact on companies’ assets and profits, affect the evaluation of performance and executive compensations. This paper tries to find out what role the fair value measurement will play. The conclusion offers insight into executive compensation contracts of companies and will promote the development of fair value accounting and Chinese companies. This paper is divided into six parts. The first chapter is a brief description of the study on the significance, research methods, frameworks and main innovative points. The second chapter introduces the literature review of the research situation at home and abroad. The third chapter describes the fundamental theory in this field, which includes concept, fair value and compensation contract. The fourth chapter puts forward the study design and hypothesis, builds the model. The fifth chapter is mainly about empirical analysis and draws conclusions from the results. The descriptive statistical analysis and regression analysis are based on the data of listed companies in2007-2012. In the last chapter, according to conclusion, related suggestions of improving the fair value measurement and the structure of executive compensation contract are put forward, and the limitations of the study and further research area are pointed out.There are three possible innovations of this study. First, studies compensation contract from the perspective of fair value, divides company’s performance into two parts and makes contrastive research. Second, builds model to test the salary-performance sensitivity and the compensation stickiness, points out that the use of fair value enriches the content of information in the accounting performance but reduces the effect of contraction. Third, selects the data from2007to2012and provides reference for further study in the future.But still, there exist deficiencies and limitations in the study. Some points needed further research. First, China started late on the implementation of fair value measurement, so the study period is limited in6years. Second, the information disclosures are still incomplete in some of the listed companies, which affect the amount of sample units. Third, stock incentive plans are not widely implemented in Chinese companies, so this paper chooses monetary compensation into consideration. Fourth, Other Comprehensive Income was introduced into the income statement in2009, further research is needed and conducts the analysis in a more comprehensive way. |
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