Research On The Effect Of Executive Incentive On Accounting Conservatism Based On Equity Concentration

In recent years, there were large numbers of financial fraud cases. We must focused on the company’s performance. At the same time, more attention had been paid to accounting conservatism of listed company. Accounting conservatism is not only one of the basic principles of accountant, but also an important content of corporate governance. The formation of corporate system conduced the separation of two rights.As one of the contents of corporate governance, executive incentive theory has an important relationship with accounting conservatism. Therefore, the problem is how to make the company and shareholder have a maximal interests from the executive behavior by improve senior monetary compensation incentive and equity incentive. at the same time accounting conservatism has been improved. So it is necessary to study the influence of different executive incentive mode for accounting conservatism.This paper study effect on the accounting conservatism from different ways of executive incentive based on the equity concentration and further revealing the relationship between them.Study found:(1) It is a negative correlation between executives monetary compensation incentive and accounting conservatism.(2)Accounting conservatism is improved by executive equity incentive. Namely, the executives shareholding proportion and the interests of the listed company has reached the convergence, by which accounting conservatism is improved.(3) The relationship between accounting conservatism and executives monetary compensation incentive is influenced by equity concentration. In the listed company with equity concentration,executives monetary compensation incentive may reduce accounting conservatism. In the listed company with diffuse equity, executives monetary compensation incentive may improve accounting conservatism.(4) The relationship between accounting conservatism and executive equity incentive is influenced by equity concentration. In the listed company with equity concentration, executive equity incentive may improve accounting conservatism.According to the research conclusions, this paper puts forward the following policy recommendations:(1) At present, the executives monetary compensation incentive of listed companies is widespread used in China. But the executive equity incentive is still in the exploratory stage. Therefore, we should maximize the function of the executivecompensation incentive mechanism and arouse the work enthusiasm of senior executives by combining the short-term accounting surplus executives monetary compensation executives and the long-term market value of equity incentive, so that we can improve the listed companies accounting conservatism effectively and guarantee our capital market information real and effective.(2) The effect on the company conservatism from the listed company executives monetary compensation incentive and equity incentive under the different ownership concentration is different. Equity concentration can affect the company’s business objectives and investment behavior.After that, the choice and effect of company executive incentive may be influenced. At last, company’s operating performance and accounting conservatism would be influenced. Therefore, the equity concentration of the listed company should be improved.(3) A comprehensive and effective performance evaluation system should be established, so as to ensure the smooth progress of the incentive mechanism from inside the company. At the same time, the corporate governance mechanism,strengthen information disclosure, the market efficiency, the construction of manager market and perfect legal environment should be improved. And the guidance incentives linked to company accounting conservatism should be continuously strengthened.