A Study On CFO Compensation Incentive And Accounting Conservatism

In the process of modern corporate governance mechanism development and improvement,the.CFO plays an increasingly important role in corporate governance.Their functions have been extended from accounting and financial decision making to the field of strategic decision-making,internal control and information management etc.However,no matter how the functions of CFO expand,the choice of the accounting policy and the financial decision are still hardcore.The existing literature studies have found that the greater the power and ability of CFO,the higher the quality of the accounting information of the listed companies.However,all of these studies start from an objective perspective to analyse the impact of CFO on the quality of accounting information of listed companies.And the underlying premise of these studies is that financial executives can fulfill their fiduciary duties conscientiously,which is consistent with shareholders' goals.Few studies have studied the impact of CFO on the quality of accounting information from the perspective of the character subjective motivation.This paper selects the classic perspective of accounting research,accounting conservatism,to examine whether the selfish motivation of CFO which is incurred by compensation incentives can affect the quality of accounting information.Based on the principal-agent theory,incentive theory and upper echelons theory,combing the domestic and foreign literature on accounting conservatism and manager incentive,this paper uses all Listed Companies in Shanghai and Shenzhen market from 2008 to 2015 for empirical research.The study finds that the incentive to CFO will lead to the reduction of accounting conservatism.This phenomenon is more significant in the following firms:(1)the state-owned enterprises,(2)the firms that the chairman and CEO are the same person,(3)the firm in which the first major shareholders holding a high proportion.In order to solve the endogenous problem,this article uses the lag phase of the CFO's salary incentive to further test,the basic conclusion has not changed.This paper will study the quality of accounting information which is extended from the corporate level to the executive behavior level,and focus on the CFO.This research makes up the existing research deficiency that there are little researches about the relationship between the subjective motive of CFO and the quality of accounting information.It also provides new possible research direction of accounting information quality.According to the relevant theoretical analysis and empirical results,this paper puts forward the following suggestions:(1)the listed companies should improve the salary incentive mechanism.(2)investors should pay more attention to the salary level of the CFO of the listed companies,and consider the negative effects of their subjective motivation on the accounting conservatism.