Study Of Executive Compensation And Real Earnings Management Based On Corporate Life Cycle

Earnings management has always been a focus area of empirical accounting research by domestic and foreign scholars,and executive compensation incentive is a core issue of corporate governance.In recent years,the issue of executive compensation for listed companies and whether such high compensation can improve enterprise performance has always been a hot topic of discussion among people from all walks of life.Many scholars have begun to study the relationship between executive compensation and earnings management,as the financial scandals such as WorldCom and Enron are exposed.Due to the perfection of accounting rules and regulations and the strengthening of the overall regulatory environment,the enterprise carries out the traditional accrued earnings management is easily recognized by market regulators,then use accounting methods to adjust the profit space is very limited,the executives prefer a more sophisticated and covert real earnings management.Real earnings management can improve the company's reputation and stock price,but it is not good for the future development of the company.It is a kind of behavior of "drinking poison to stop thirst".Therefore,Executives are to choose out of self-interest in real activity operating earnings management to achieve the maximization of individual interests,or to stand in the company's point of view of real earnings manipulation will have a negative impact to the enterprise development in the future,is not conducive to their own long-term interests,thus inhibiting real earnings management behavior,This problem deserves further study.Previous studies on the relationship between executive compensation and earnings management,and the economic consequences of manipulating the real earnings management have neglected the life cycle stages of the corporate,so the credibility of research conclusions is likely to decrease.Based on the past research results,this thesis analyzes the relationship between executive compensation incentive and real earnings management from the dynamic perspective of corporate life cycle,and whether the economic consequences ofmanipulating the real earnings management will show significant life cycle effect.Based on literature review and theoretical analysis,this thesis analyzes the relationship between corporate life cycle stages,executive compensation and real earnings management,and then puts forward research hypothesis.Secondly,using the data of China's A-share manufacturing listed companies for the past 10 years as the research object,which has improved the pertinence and accuracy of research to a certain extent.Thirdly,on the basis of dividing the life cycle stages of the corporate,combining the real earnings management model designed by Roychowdhury(2006),constructing the research mode to verify the research hypothesis of this thesis.Finally,we draw conclusions through empirical research,propose targeted countermeasures based on conclusions,and point out the shortcomings and the direction of future research.The conclusion of this thesis is as follows: Firstly,in a certain range,executive compensation is negatively correlated with real earnings management,which indicates that executive compensation incentive can effectively inhibit the real earnings management.Secondly,there is a significant life cycle effect on the incentive effect of executive compensation,with the advancement of the corporate life cycle,the incentive effect of executive remuneration presents "U-shaped" distribution: the incentive effect on the real earnings management is least significant during introduction and decline periods,less significant during growth periods and phase-out and most significant during mature period.Thirdly,with the advance of corporate life cycle,the economic consequences of real activities manipulation show a "U" type distribution: the negative effect on further performance is highest significant during mature period,less significant during phase-out and growth periods and least significant during introduction and decline periods.Therefore,enterprises in the choice of compensation incentives,they need to combine their own life cycle and adopt the differentiated strategy.This conclusion can also provide an important reference for the corporate life cycle on the mechanism and path of the enterprise.