Research On The Relationship Between Management Compensation And Earnings Management

The separation of the two powers(ownership,management rights)in improving the efficiency of the company,but also brought a principal-agent problem,the company's shareholders or owners and scholars continue to explore solutions.Jensen&Murphy(1990),Jensen et al.(2004)believe that compensation incentive is an effective way to alleviate the problem of agency.They believe that all acts of occupation managers are from their own interests or needs,so,in order to make the occupation managers(trustee)to shareholders or owners(clients)expectations or requirements management,it should set up the corresponding content as far as possible to meet the most urgent needs of occupation managers,so that it can conduct meet the expectations of shareholders or owners.Therefore,the compensation incentive to management becomes the main way to solve the principal-agent problem.However,in the company,the management pay is often linked to individual performance and the overall profitability of the company.As a direct participant of the company's operations,compared to other stakeholders,the management company holds all the first-hand information,which helps the use of various financial and non-financial policies or measures,to have access to information and make adjustments,so as to improve the overall performance of the personal performance and company,maximize the realization of their own interests.The relationship between management compensation and earnings management,the paper distinguishes the two kinds of accrual and real earnings management,research management based on the perspective of compensation effect on earnings management,to make up for the limitation of research on Accruals earnings management.At the same time,based on whether management has decision-making power,the management is divided into executives,directors and independent directors,and the effects of management after the breakdown of the influence of compensation perspective accrual and real earnings management based on.In addition,the different nature of the ultimate controller,the management of the remuneration will have their own characteristics.Therefore,based on the different property rights,this paper examines the impact of the subdivision management and real earnings management on the basis of compensation.The principal-agent theory,human capital theory and based on the reference to a large number of domestic and foreign literature,this thesis selects the Shanghai and Shenzhen A shares of all listed companies in 2011-2015 data as the primary data,research show that:(1)the earnings management behavior of the management of the company are mainly caused by the compensation contract.(2)executive compensation incentive and directors' salary incentive are positively related to accruals and real earnings management,and independent directors'remuneration is negatively related to accruals and true earnings management.(3)state-owned enterprises focus on real earnings management,and non-state-owned enterprises pay particular attention to accruals management.According to the research conclusions,the paper puts forward policy recommendations from two aspects of the external environment and internal mechanism.