An Empirical Study Of The Relation Of Executive Compensation, Executive Shareholding Ratio And Earnings Management

As with the rapid and deep development of Chinese economics, nowadays, in Chinese capital market, the business agency problems have become prominent and must be solved. Actually, many other developing countries are in bad situations facing those. During the last years, the policy of recommence and opening in China has gained primary achievements with efforts from the government and market, such as the increasingly separation of ownerships and management rights, the gradually speeding up of marketization pace, the broadening of the companies’fields and growing of their strength as well as the continuous improvement of the governance mechanism. All of those have created huge rising space for the performance of executive ability and the accumulation of wealth, thus bringing up lots kinds of high salary. While seeing from overall situation, high salary represents a sign of increasement of Chinese economics, the problems of company governmence can’t be neglected.According to the many scholars who research earning management and executive compensation, there are strong correlations between them under the background that the executive compensation is unnecessarily published. In Chinese capital exchange market, the growth enterprise market plays a crucial role between the medium-sized high-tech growth companies and new emerging firms, and the pushing out of it has vastly promoted the developments of them, which was influenced by the short running time or the concept of lack capitals. During the development of growth enterprise market, there has been some phenomena such as high offering price, high price-to-earnings, high super raise funds and frequently reducing holding and cashing out of the executive, all of those have aggravated the market investment risk, and especially for the last one, not only does it incur the investers’worries about growth enterprises market but also it reduces the investment confidence of them. As a consequence, it attaches great importance to build a good way towards solving the problems of the executive compensation and earnings management hindering the development of growth enterprises market, however, the empirical researches about the executive reducing holding in the finance field are still really lacking and most of them are focusing on the mature main board market.This thesis studies the relationships between executive compensation, executive shareholding ratio and earnings management, which is on the basement of the samples of the listed companies on earnings management between 2010 and 2014, both in Shanghai and Shenzhen. We use multiple linear regression analysis as the main analysis method. The main parts are concentrating on the influences of earnings management on executive compensation and CEO share-holding rate as well as the relevance between growth enterprise market and main board market. Finally, we found out that the executive compensation and the earnings management are on negative relevance, while the executive shareholding ratio is uncorrelated to the earnings management that should be counted, besides, there is no obvious relationship between the CEO share-holding rate and earnings management in growth enterprise market, which means there are differences between them.