The Researeh On The Effects Of Management Incentives On Accounting Conservatism

As the prosperity and development of the securities market,the governance issues of listed companies are increasingly acute.Both management incentives and accounting conservatism have the effect of reducing agency costs under two rights separation,thus they both become effective corporate governance mechanism to solve the principal-agent problem in their respective fields.Under the economic transition,the external environment faced by state-owned enterprises has experienced the change of accounting standards,reform of equity division,impact of financial crisis and reform of compensation systems.These changes in environment bring huge risks to the business decisions of management,so it is necessary to evaluate the effectiveness of the internal governance under the premise of the external environment factors.When companies face a higher degree of environmental uncertainty,the role of executive management incentives become increasingly important.Whether incentive mechanism effectively or not will directly impact on the behavior of management.Thus,as a result of accounting policy choice by management,it is clearly that the degree of accounting conservatism must be affected by incentive mechanism.Based on the above background,this article first collect and classify the research achievements of the related area,then put forward the research hypothesis based on eight kinds of important theory and the present situation of the state-owned listed enterprises,finally selects state-owned listed companies of A shares in the stock markets of Shanghai and Shenzhen from 2010 to 2014 as samples,thinking of explicit and implicit incentives simultaneously,and makes empirical analysis about the combination and its intensity of management incentives effect on accounting conservatism from three aspects namely executive compensation incentive,equity incentive and on-the-job consumption.Furthermore,based on the contingency perspective of external market environment,this article tests whether environmental uncertainty and its differences have different effects on the relationship between management incentives and accounting conservatism.The empirical study finds that: in state-owned listed companies,both compensation incentive and on-the-job consumption significantly lower accounting conservatism,but equity incentive do not have a pronounced effect on accounting conservatism.At present,incentive mechanism in state-owned listed companies is lack of effectiveness,for personal gain,management may control accruals by earnings management behavior,and then lower the degree of accounting conservatism.Environmental uncertainty has moderate effect on the relationship of management incentive and accounting conservatism.Higher degree of environmental uncertainty increases the negative impact of compensation incentive and on-the-job consumption to accounting conservatism,but plays an important role in the positive influence of equity incentive to accounting conservatism.When environmental uncertainty is lower,the level of incentive shows relatively weak influence on accounting conservatism,when environmental uncertainty becomes higher,this effect is more obvious.The existing studies mostly analyze the factors related to management incentives and accounting conservatism from the micro level.This article expands and enriches the economic consequences research in the field of management incentives,and the influence factors research of accounting conservatism.Moreover,it provides experience about the relationship between the external macro market environment and the internal governance mechanism for the theory and practice.In the end,based on research conclusions,this article suggests several feasible ideas in order to better promote the reform of state-owned enterprise compensation system,and better improve the consistency of interests between management and shareholder by formulating management incentive contracts that can coordinate with external governance environment,help the disclosure of earnings information with modest conservatism features and has the characteristic of high efficiency.