The Study On The Relationship Between The Heterogeneity Of Earnings Management And Executive Compensation

Earnings management has become the focus of the academic and social circles because its extensive existence and importance to the stakeholders.In present empirical research,most scholars hold that earnings management is homogenization opportunism,while ignoring the perspective of efficient contract and information transmission.As a result,it caused the debate between “earnings management perspective” and “effective incentive perspective” of executive compensation incentive.In the practice of management,executives implement two types of earnings management behavior.According to the implementation of motivation,we can divide it into opportunism earnings management and information-transmitting earnings management.Earnings management can be divided into accrual earnings management and real earnings management based on implement method.The existing researches on the heterogeneity of earnings management mainly focus on the opportunism accrual based earnings management.However,with the improvement of accounting laws and regulations and the strengthening of market supervision environment,more companies use two means of earnings management to whitewash financial statements.Firstly,this paper reviews the research status of earnings management,corporate governance and executive compensation at home and abroad;Secondly this paper reviews The principal-agent theory,the optimal contract theory and the management rights theory,and puts forward the research hypothesis according to the mechanism of earnings managements,corporate governance and executive compensation;Finally we selected the listed companies in Shanghai and Shenzhen from 2007 to 2015,based on the heterogeneity of earnings management,after the division of opportunism earnings management and information-transmitting earnings management,study the possible different effects of different types of earnings management behavior on executive compensation.We also introduce the corporate governance mechanism into the relationship between earnings management and executive compensation,construct and test its adjustment and correction function.The empirical results show that different types of earnings management have different effects on executive compensation.Accrual and real earnings management of opportunism are significantly negatively correlated to executive compensation.While information-transmitting earnings management have no significant impacts on executive compensation.The internal and external governance mechanism has an intrinsic inhibitory effect on the behavior of executives to obtain high compensation through opportunistic earnings management.When the executive power is lower,the negative effect of opportunistic earnings management on executive compensation is greater.When CEO separates from chairman of directors,the opportunistic earnings management(accrual and real)is significantly negatively correlated with executive compensation.When the proportion of managerial ownership is lower,the opportunistic real earnings management is significantly negatively correlated with executive compensation.When the proportion of executive stock ownership is higher,he will increase the self compensation through the opportunistic accrual earnings management.The larger the corporate governance variables,which balance the executive power,the greater the negative effect of opportunistic earnings management on executive compensation.When the proportion of independent directors is higher,the opportunistic earnings management(accrual and real)is significantly negatively correlated with executive compensation.When the audit quality is higher,the opportunistic earnings management(accrual and real)is significantly negatively correlated with executive compensation.When the board size is larger,the opportunistic accrual earnings management is significantly negatively correlated with executive compensation.However,the opportunistic real earnings management is negatively correlated with executive compensation but not significant.When the degree of board diligence is higher,we draw the opposite conclusion.When the ownership concentration is higher,the opportunistic accrual earnings management is negatively correlated with executive compensation,but not significant.The opportunistic real earnings management is significantly negatively correlated with executive compensation.When the proportion of institutional investors is higher,there is no significant correlation between the earnings management and executive compensation.