Research On The Influence Of External Unfairness Of Executive Compensation On Earnings Management

In the modern enterprise system,the ownership and management rights of the enterprise are separated,and the principal and the agent both generate principal-agent problems due to conflicts of interest.The enterprise formulates a compensation contract mechanism to solve such principal-agent problems.The rationality of enterprise compensation contract formulation includes two aspects.namely the efficiency and fairness of incentives,which are highly concerned by academics and practitioners.The executive compensation disclosed in the listed company’s annual report provides a basis for the executives of different companies in the same industry to compare their salaries.Usually,the basis for the establishment of executive compensation is mostly dependent on the company’s performance surplus.Therefore,the external unfairness of executive compensation is high.The nanagement of corporate accounting surplus provides motivation and excuses.Executives adjust the accounting information by using the choice of accounting information,resulting in the accounting surplus of the company’s external disclosure does not represent the real urplus of the enierprise.The appointment of state-owned enterprise executives has a political color.State-owned enterprise executives pay more attention to non-monetary rewards such as administrative level and on-the-job consumption.As a supplement to monetary compensation,it can alleviate the unfair feeling brought about by the monetary compensation gap.Corporate executives mainly rely on monetary compensation incentives,and executive compensation is mostly based on performance appraisal.Therefore,whether the difference in property rights can give different impacts on the external unfairness of executive compensation on corporate earnings management is worth studying.At the same time,with the continuous improvement of the corporate governance structure,more and more executives began to hold the company’s equity.and executives’ shareholdings linked the interests of executives to the interests of shareholders to some extent.This paper will also explore whether executie shareholding can mitigate the earnings management behavior generated by external unfairness of executive compensation.In addition,executives have certain liquidity in the manager market.When the industry is highly competitive,executives may consider higher turnover through professional mobility.This article will further explore whether executive liquidity can alleviate the above problems.In order to answer the above questions,this paper takes the 2011-2017 A-share listed companies as a sample.taking the external unfairness of executive compensation as the independent variable and the degree of corporate earnings management as the dependent variable.Combined with the theoretical basis,we first examine the effect of external unfairness of executive compensation on the management of corporate earnings under the full sample.On this basis,from the nature of property rights and executive shareholding,the differences in the nature of different property rights and the influence of different executives’ shareholdings on corporate earnings management are examined.In addition,the role of executive liquidity in regulating these relationships is further explored.The study found that the greater the external unfairness of executive compensation,the higher the degree of earnings management of enterprises.The nature of property rights and executive shareholding can influence the external unfairness of executive compensation on the management of corporate earnings.In addition,executives’ liquidity in the manager’s market can curb earnings manipulation from external unfairness in pay.The conclusion of this paper is to provide useful hep for enterprises to improve executive compensation disclosure information,do a good job of salary survey,reduce the external unfairness of executive compensation.and enrich the form of salary incentives.