The Nature Of Equity, Executive Pay Gap And Earnings Management

With the further separation of ownership and management rights and the existence of insider control,salary contract system has aroused widespread concern in the community which is a system to ease the issue of principal-agent.The salary contract has always been regarded as a method of corporate governance to effectively alleviate the issue of principal-agent issues,that is,by paying salary to motivate executives in order to strive to enhance the company's performance,so that the goal of executives and the owners tend to be consistent.With the exposure of millions of annual salary from Guotai Junan,and ten million annual salary from Pingan and Deloitte released China's A shares of listed companies executive compensation survey report,that have triggered a public debate on the distribution of pay.The theory of equity argues that the members of the organization will compare the results of the final distribution after their remuneration,and the results of the comparison will affect the enthusiasm of their future work.This comparison includes not only the comparison within the organization but also the comparison of external counterparts.The executives will compare their own remuneration with the same level of colleagues and the same industrial executives,in order to evaluate the fair of their salary.Recent studies have shown that remuneration contracts are difficult to play because of the imperfections of modern enterprise systems and the existence of internal controls,and may lead to a series of moral risks such as manipulating information releases,over-implementing earnings management,and misuse of finance Decision-making power and other acts.This article is based on the theory of equity,studied the salary gap between internal and external executives on earnings management,and considering the influence of salary gap between internal and external executives on earnings management of different ownership property will be different.The research conclusions of this paper have some theoretical and practical significance for the development of executive compensation of listed companies and the suppression of earnings management behavior.This paper adopts the method of qualitative research and quantitative research.The research ideas of this paper are as follows:firstly,on the basis of combing the relevant literature at home and abroad,as well as the definition of relevant concepts and theoretical analysis,than propose the research hypothesis.Then,from China's 2012-2014 Shanghai and Shenzhen A shares of listed companies as samples,construct the model to the executive internal salary gap and the executive external salary gap,earnings management and equity nature,using statistical software STATA.12.0 to carry on empirical analysis.Finally,according to the results of the empirical analysis,we draw the conclusions,further analysis of the enlightenment and policy recommendations,and reflect on the shortcomings of this article,for further prospects.The results show that executive pay gap has a significant positive impact on earnings management,and the impact of different ownership nature on the relationship between the two is different.Specifically as follows:First,the internal and external pay gap is positively related to earnings management.Second,compared with the state-owned enterprises,the internal and external salary gap of non-state-owned enterprises executives is positive to the earnings management.The impact is more significant.Therefore,in the development of executive compensation system,should take full account of the needs of executives at the same time taking into account the efficiency and fairness,the development of scientific and reasonable salary system,give full play to the positive incentive system.