Executive Compensation And Earnings Management

The separation of corporate ownership and operating rights leads to the problem of principal-agency.Compensation contract is an effective way to solve the problem of principal-agency,but it also induces executives' earnings management behavior,that is,earnings management based on compensation contract motivation.At present,domestic research in this area mainly focuses on accrued earnings management,and there are few studies on real earnings management,and much fewer studies on the combination of the accrued and real earnings management,which provides an opportunity for us to explore the correlation between executive compensation and the two kinds of earnings management.As the special national conditions in China,the ownership of the corporate is different,so the impact of executive compensation on the two kinds of earnings management may be different.Therefore,this paper also adds the nature of ownership to the study.This paper uses the data from 2012-2016 of A-share companies listed in Shanghai and Shenzhen in China as research samples,and empirically studies the correlation between executive compensation and the two kinds of earnings management,as well as the impact of different ownership properties on the relationship between the accrued and real earnings management.The findings are as follows:(1)There is a significant negative correlation between executive currency compensation and accrued earnings management,which shows that executive currency compensation can significantly inhibit accrued earnings management behavior of listed companies.In addition,the executive currency compensation is significantly negatively correlated with upward accrued earnings management,and negatively correlated with downward accrued earnings management but not significantly,indicating that executive currency compensation mainly inhibits upward accrued earnings management behavior of listed companies.(2)executive equity incentive is significantly negatively correlated with accrued earnings management,which shows that executive equity incentive will inhibit accrued earnings management behavior of listed companies,that is to say,the implementation of stock incentive to executives will inhibit their accrued earnings management behavior.In addition,executive equity incentive is significantly negatively correlated with upward accrued earnings management,and is negatively correlated with downward accrued earnings management,but not significantly,indicating that executive equity incentive mainly inhibits upward accrued earnings management behavior of listed companies.(3)Both executive currency compensation and executive equity incentive are significantly negatively correlated with real earnings management,which shows that both executive currency compensation and executive equity incentive can significantly inhibit real earnings management behavior of listed companies.In addition,executive currency compensation has a significant inhibitory effect on real earnings management of production cost manipulation,sales manipulation,and cost manipulation,while executive equity incentive mainly significantly inhibits real earnings management of production cost manipulation and cost manipulation.(4)In the study of the influence of different ownership attributes on the relationship between executive compensation and earnings management,the state-owned nature of listed companies will significantly reduce the inhibitory effect of executive equity incentive on accrued earnings management,that is to say,compared with state-owned enterprises,executive equity incentive in non-state-owned enterprises is more effective in inhibiting accrued earnings management.The state-owned nature of enterprises can significantly reduce the inhibitory effects of executive currency compensation on the real earnings management behavior of listed companies,and it also can significantly reduce the inhibitory effects of executive currency compensation on the real earnings management of production cost manipulation,sales manipulation,and cost manipulation,that is to say,compared with state-owned enterprises,executive currency compensation of non-state-owned enterprises has a stronger inhibitory effect on real earnings management.The state-owned nature of listed companies will significantly weaken the inhibitory effect of executive equity incentive on real earnings management,and it mainly significantly weakens the inhibitory effect of executive equity incentive on real earnings management of cost manipulation,that is to say,compared with state-owned enterprises,executive equity incentive in non-state-owned enterprises has a stronger inhibitory effect on real earnings management.