The Empirical Research On The Influence Of The Company’s Internal Pay Gap On Earnings Management

In recent years, earnings management is a hot issue in the field of accounting research. At present, accounting laws and regulations system of China is not perfect, the external supervision measures are not effective, the management of the company to the reward contract,debt contract, tax avoidance and financing for the motivation of earnings management behavior often occurs, resulting in the distortion of accounting information in China is more serious. The characteristics of the modern enterprise system is the separation of ownership and management, the management ability of the company’s executives is crucial to the development of the enterprise. In order to motivate executives to work hard, the owner arranged a variety of pay incentives for executives. But as the executive pay disclosure system becomes more and more transparent, the executive’s huge pay gradually aroused the public’s doubts, the focus of public attention has gradually shifted to the issue of pay gap.In this thesis, based on the 2013 Shanghai and Shenzhen A shares of listing Corporation data as the research object, use the method of standardized research and empirical research,investigate the impact of the pay gap between executives within the company and the pay gap between executives and staff on earnings management. Firstly, summarize and analyze the pay gap and the pay gap between earnings management literature with the method of literature review, elaborate the basic theory, such as agency theory, relative exploitation theory and equity theory. On this basis, introduce the the theoretical analysis of the impact of company’s internal pay gap on earnings management and propose hypotheses. Then based on the data of2013 the Shanghai and Shenzhen A-share listed companies’ data as the research object, using linear regression method analyze the impact of the company’s internal pay gap on earnings management. The result shows that the internal executive pay gap has a positive impact on earnings management. That is to say, the sense of injustice which is aroused by the pay gap can cause a sense of earnings management behavior of executives. Finally, introduce three manipulated variables of the nature of the company’s equity, in a period of equity financing, in a period of executive stock option exercise to the linear regression model to explore the impact of pay gap between executives on earnings management in the specific events time period and under different ownership. The empirical results show that the pay gap between state-ownedenterprise executives has a stronger impact on earning management. In the period of equity financing, executive pay gap has a negative effect on earnings management. During the company’s stock at the exercise executives, executive pay gap has a positive effect on earnings management. In addition, the pay gap of executives and employees also showed a significant positive correlation.