Internal Executive Monetary Pay Gap,CEO Succession And Financial Restatement

Financial report is the most important source for investors to understand the information of listed companies.High-quality financial accounting information is the basis for the effective operation and healthy development of the capital market.Financial restatement refers to the post-event behavior of the company admitting that there are major omissions or misstatements in the financial statements and correcting or supplementing the errors in the financial reports announced in the early stage.It is not difficult to see from the definition of financial restatement that financial restatement is the embodiment of the quality of accounting information disclosure.The financial restatement event makes the public question the authenticity and credibility of the company's financial statements,which may cause the company to suffer a huge loss of market value,and the restatement behavior may also have a negative impact on the promotion of the management.In recent years,the Chinese government has continuously improved relevant regulations and strengthened supervision,and made efforts to improve the standardization of accounting information disclosure and improve the quality of accounting information disclosure in China.However,the financial restatement is still on the rise year by year,and frequent financial restatement has become an unstable factor in China's capital market.In this context,it is particularly important to seek effective corporate governance mechanism to reduce the occurrence of financial restatement.Salary incentive mechanism is an important factor in corporate governance.Scholars who support the championship theory prove that the internal salary gap of senior executives has an incentive effect on senior executives,which can enhance their efforts,regulate their management behaviors,and ultimately improve corporate performance.However,from the perspective of behavioral theory,excessive pay gap causes executives to have a sense of injustice,which leads them to work negatively or take extreme management behaviors.There is an unignorable correlation between senior executives and corporate financial restatement.The intentional manipulation of earnings by senior executives,unintentional negligence or lack of ability may lead to financial restatement.One of the consequences of financial restatement is to raise public doubts about the work of the existing management team and reduce the probability of their promotion.CEO succession is an important strategic decision of an enterprise.Under championship theory and expectation theory,succession of new CEO will reduce the probability of senior executives' promotion in the short term and affect the incentive effect of salary gap.This paper focuses on the incentive effect of the internal pay gap of senior executives in the championship theory,studies the impact of the internal monetary pay gap of senior executives on financial restatement,and takes into account the behavioral theory viewpoint,and studies the applicability of the two viewpoints under different pay gap levels.In addition,the factors of CEO succession are added to further analyze the inhibitory effect of internal monetary salary gap on financial restatement under the influence of CEO succession events.This paper reviews the existing literature at home and abroad,summarizes the research results of previous scholars,and clarifies the research direction and research objectives.On this basis,combined with the relevant knowledge of finance,accounting and management,the paper analyzes the content of this paper and puts forward the research hypothesis.Based on the research hypothesis and empirical model,the data of A-share listed companies in Shanghai and Shenzhen stock markets exchanges from 2009 to 2017 are taken as samples,and the research hypothesis is empirically analyzed by STATA14 software.The conclusions of this study are obtained and some feasible suggestions were proposed.This paper consists of six parts:The first part is introduction.Firstly,this part elaborates the research background of this paper from the perspective of the increasing frequency of financial restatements and the regulating effect of the salary gap.Secondly,it demonstrates the research significance from the two aspects of theoretical research significance and practical application significance.Thirdly,it elaborates the research method used in this paper.Finally,the innovation of this paper is expounded.The second part is literature review.This part summarizes and sorts out the existing literature from three aspects of incentive effect of internal compensation gap of senior executives,internal compensation gap and financial restatement,incentive effect of CEO succession and internal compensation gap of senior executives in a logical sequence.The third part is theoretical basis and research hypothesis.On the basis of defining important concepts,this part elaborates the theories of tournament theory,behavior theory,principal-agent theory and expectation theory,which are mainly applied in this paper.The fourth part is research design.This part introduces the selection of data and the definition of variables,as well as the measurement method of key variables,and finally puts forward the empirical model of this paper.The fifth part is empirical test.Based on the definition of variables and model construction in the fourth part,this part uses measurement software to empirically test the hypothesis proposed in this paper.The empirical analysis includes descriptive statistics,correlation analysis,regression analysis and robustness test of sample data.The sixth part is research conclusion and suggestion.This chapter analyzes the results of empirical test and tries to put forward Suggestions based on the research conclusions.Meanwhile,it summarizes the research contributions and limitations of this paper and points out the direction of further research.The research results of this paper show that:(1)In general,the internal monetary salary gap of senior executives has an inhibitory effect on financial restatement.(2)After distinguishing the level of the pay gap,when the level of the pay gap is low,increasing the pay gap can inhibit the financial restatement;when the level of the pay gap is high,increasing the pay gap can no longer inhibit the financial restatement,but it does not significantly increase the probability of the financial restatement.(3)CEO succession will weaken the restraining effect of internal monetary pay gap on financial restatement.(4)Compared with internal CEO succession,when the new CEO comes from outside,the weakening effect is more obvious.(5)There is no significant difference between financial statement restatement and non-financial statement restatement in the inhibitory effect of the internal monetary salary gap of senior executives on financial statement restatement.(6)Compared with non-core financial restatement,the internal monetary salary gap of senior executives has a more obvious inhibitory effect on core financial restatement.The innovation of this paper is shown as follows:in terms of research content,CEO succession is introduced into the research on the relationship between the internal monetary pay gap and financial restatement of senior executives as a moderating variable.In addition,in the further analysis,this paper distinguishes the types of restatements in two ways,and studies the difference of the impact of the internal monetary salary gap on different types of financial restatements,which enriches the existing research on financial restatements.In terms of variable measurement,based on the definition of CEO,this paper measures the salary gap caused by job promotion with the manually sorted CEO salary data and the average value of non-CEO salary,which is more intuitive.In terms of research design,when considering the relationship between pay gap and financial restatement based on two different theories,this paper does not put forward the competitive hypothesis according to the general practice.In the study,the samples were divided into three groups according to the level of salary gap,and regression was carried out for the low group and the high group respectively to analyze the applicability of different theories under different levels of salary gap.