Executive Internal Gay Gap,Ownership Concentration And Earnings Management

With the perfection and development of the securities market,listed companies are more and more,due to the increasingly fierce market competition,poor corporate governance and other reasons,a lot of problems gradually exposed,including earnings management,Which become the bottleneck for the further development of the company.Earnings management mainly manipulate the accounting profit,financial statements and the motivation mainly includes capital market motivation,contracting motivation.The ways are varied,such as changes in accounting methods,related party transactions,increase or decrease of discretionary expenses and so on.Earnings management has a great influence on the development of listed companies,and executive pay and equity structure as the important content of corporate governance,studies its influence on earnings management is valuable for listed companies to take measures to effectively reduce the earnings management behavior.Executive pay is the remuneration and compensation because the executives provide services for the company,and executive pay gap is a problem about the fairness of the executive pay,including internal and external gaps.Tournament theory is that with the increase of executive internal pay gap,the benign competition mechanism will form within the enterprise,executives can improve firm's performance through the proper way to hard work.According to equity theory,compared with ordinary employees,executives have higher status and greater ability,so they will pay more attention to fairness.Executives' unfair perception will directly influence their work motivation and behavior,or work harder for a “fair” payment or acquire the “fair” payment through opportunistic earnings management.One study in this paper is the influence of executives' internal pay gap on the earnings management's level.Ownership concentration as quantitative indicators of equity structure,is one of the core issue of corporate governance.All shareholders will be more positive on executive supervision while equity is relatively decentralized and equity restriction.And with the better supervision,executive's space of earnings management is small;While equity is relatively concentrated,medium and small shareholders' purpose is t o obtain capital gains through short-term investments and their supervision to the e xecutive is weakening.At this time,supervision mainly depend on large shareholders,but considering the supervision cost,supervision effect is decreased in fact,so the e xecutives may have more space for earnings management.One study in this article i s the ownership concentration's influence on earnings management.After the above two research,considering our country's ownership concentration is higher,the internal pay gap will affect the influence of ownership concentration on earnings management or not is also studied.On index selection,natural logarithm of difference between the former three executives pay and other executives pay measures the executive internal pay gap;the proportion of the largest shareholder measures ownership concentration;discretionary accruals calculated by the modified Jones model measures earnings management.This article selects 2008 to 2014 A-shares of Shanghai and Shenzhen stock exchange as sample.The study found that executive internal pay gap has significantly negative relationship with earnings management,that is the bigger executive internal pay gap,the lower earnings management level;Ownership concentration has significantly positive relationship with earnings management level,that is with the improvement of ownership concentration,earnings management level increased significantly;And executive internal pay gap can reduce influence of ownership concentration on earnings management.The company size,asset-liability ratio and return on total assets have significantly positive relationship with the level of earnings management,the company growth and the total asset turnover has significantly negative relationship with earnings management.According to the results,it is concluded the enlightenment and suggestions.From the perspective of corporate governance structure,it is very necessary for the company to have a reasonable equity structure.Equity restriction between the shareholders and implement effective supervision for executives can reduce executives' earnings management behavior.As for regulation,supervision departments need to effectively identify the potential earnings management behavior and regulation,and increase the intensity of punishment for earnings management behavior with great effect in order to form deterrentforce for executives who get benefit by unfair means and make them pay more attention to the daily production and business operation,safeguard interests of stakeholders.As for executive pay,the company should reduce earnings management by appropriately increase the pay gap between executives in order to break the surplus collusion between them and make the enterprise form benign competition mechanism.As for executive incentive system design,executive pay should not only tie short-term performance,but also linked to the long-term development of the company in order to reduce the short-term behavior of executives as much as possible.