Earnings Management、Executive Ability And Executive Compensation

Nowadays, the high compensation of many executives has been exposed and aroused strong public controversy. People are increasingly focusing on executive compensation issues. At the national policy level, it also has introduced the reforms. These makes the study of executive compensation has always maintained a high social value. In addition, under the system of the separation of ownership, principal-agent conflict owing to asymmetric information theory makes the study on the relationship between earnings management and executive compensation improve consistently. Also, with the development of economy and society, there is a growing awareness of the importance of human capital, the executive ability also attracted more and more attention in the academic world.Based on these, this paper will through systemic description of theory and literature on three relationships:executive ability and executive compensation, earning management and executive compensation, earning management, executive ability and executive compensation. Using DEA-Tobit model to measure executive ability more accurately. Besides, this paper combining Chinese property background wants to surplus the relationship between earnings management and executive compensation from the angle of executive ability.This paper using the panel data of listed companies from 2008-2014, totaling 7506 sample data. Combining with literature and theory, this paper obtained following conclusions:(1) executive ability and executive compensation is significantly related, and in non-SOE the correlation is higher; (2) earning management and executive compensation is significantly related, and in SOE the correlation is higher; (3) compared to low ability, executives with high ability have more possibility to using earning management to pull their compensation; Further after the introduction of property background, compared with the non-SOE, executives with higher ability in SOE are more likely to use earning management to pull their compensation. Based on the conclusions presented, this paper suggested policy recommendations.