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With the completion of the2005listed companies tradable share reform, the capital marketsrapid and stable development,in the process of development will also have someproblems,earnings management behavior is increasingly prevalent in the listed company by theshareholders, creditors and other stake holder concerns. January2006, China SecuritiesRegulatory Commission promulgated the Measures for the Administration of the listed company’sequity incentive plan. in September2006, the SASAC and the Ministry of Finance jointly issuedthe equity incentive pilot scheme of the state-controlled listed companies, Since then, the listedcompanies began to equity incentive policy slowly. Previous theoretical studies suggest that theimplementation of equity incentive policies can reduce agency costs, improve corporategovernance structure, improve the efficiency of the company’s management. From the perspectiveof management contract, the thesis not only to consider the impact to earnings management byequity incentives within the listed companies, but also analysis the earnings management frompoint of view executive compensation, jointly examine the correlation between them.Firstly, the paper arrangement the theoretical basis for executive compensation and equityincentive, and then summarize the relevant literature, on this basis, the fifth chapter does anempirical test on executive compensation, equity incentive and earnings management.This article use Shanghai and Shenzhen A-share listed companies’ date from2008to2010asthe initial sample, excluding ST shares, excluding B shares, H shares of listed companies, anddata missing companies because of it’s information didn’t disclose,etc. Then finally use Randomsampling to choose more than600sample data as the research sample. This article selectoperability accruals as regression model’s explained variable,and reviewed operability accruals’measurement model,The final selection of the modified cross section of Jones model to bemeasured,Then the results by industry division of statistics and a T-test and found that from2008to2010, three years, there are serious earnings management behavior. Finally, this paper useexecutive compensation, equity incentive as explanatory variables, asset size and asset-liabilityratio as a control variable,multiple linear regression analysis of sample data,then obtained the correlation analysis results between executive compensation, equity incentive and earningsmanagement of listed companies in China.The final empirical results can be obtain following conclusion: First, the size of executivecompensation and listed companies’ extent of earnings management, there is not have existsignificant correlation, explained that the company’s management’s motive to Adjusted surplusthat because of their own interests to increase their own salary is not obvious. Second, the equityincentive policies and the extent of earnings management does not exist a significantcorrelation,The reason may be the number of managerial ownership proportion of the total is verysmall, and can not play the desired effect of the incentive management.This article also found by inspection that a significant negative correlation between the sizeof the company’s assets and earnings management, that is, the larger of the company’s size, thesmaller earnings management motives; the company’s asset-liability ratio and earningsmanagement presents very significant positive correlation relationship, that with the rise of theasset-liability ratio, the extent of earnings management more serious. Finally, the paper make thesummary and put forward the future research prospects.
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