Dissertation > Economic > Economic planning and management > Enterprise economy > Corporate Financial Management

Real Earnings Management and Executive Compensation Empirical Study

Author LiWenWen
Tutor GengXiHua; YangRongBen
School Qingdao Technological University
Course Accounting
Keywords real earnings management executive compensation executive stockownership
CLC F275
Type Master's thesis
Year 2013
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Modern enterprise system broke entrepreneurs, owners and capitalists trinitysituation and achieve complementary advantages of resources, but it led to problemof principal-agent between the owners and operators. As business owners andmanagers have a conflict of interest between each other, and senior corporateexecutives have information superiority, and gradually master the operational control,so the interests of the owner operator is affected by "moral hazard" of adverseeffects.Compensation contracts are considered one of the important mechanisms,which has the dual role of incentives and constraints of solve agency problems. Butthe role of incentives and constraints depends largely on financial indicators ofperformance evaluation. In order to make their own private maximize the benefits,there is a strong incentive of the executives to manipulate earnings thus affecting theperformance evaluation. Therefore, based on executive compensation contract hast hepossibility of leading earnings management, this paper will examine the relationsbetween executive compensation and real earnings management.This paper describes the research background and significance of the researchcontent and methods, and based on the theory of earnings management and executivecompensation,proposed aspects of the relevant assumptions,established multipleregression model. The paper selected the3221A-share listed companies ofmanufacturing industry of financial data for the sample from2008to2012. Empiricalanalysis is divided into: first step verified the existence of real earnings managementof company; Second step test the hypothesis1.1and1.2, the results show thatexecutive pay and real earnings management has a significant negativecorrelation,between executives held proportion of shares and real earningsmanagement was a significant positive correlation; third step tests the hypothesis2.1and2.2, the results show executive compensation×remuneration committee and thereal earnings management was a significant negative correlation, executivesshareholding ratio×remuneration committee and the real management was a significant positive correlation, indicating that remuneration Committee has playeda certain role in governance, but executives ineffective governance at shareholding.The fourth step tested the hypothesis2.3and hypothesis2.4and found that executivepay×two functional unity and earnings management has a negative correlation, butdid not pass the test of significance, indicating greater executive powers, theexecutive compensation suppression earnings management the significantdecline.The proportion of executives holding×two functional unity and truemanagement was a significant positive correlation, but compared with the assumption1.2, significantly decreased, indicating that larger powers in the executive,executives holding induced the degree of earnings management significantlydecreased. Empirical analysis of two grades were grouped in accordance with theremuneration committee and the two-in-one,further validated by regression analysisa conclusion. Finally, proposing some policy recommendations at the incentive, theremuneration committee and the executive rights to reduce the likelihood of earningsmanagement and improve the quality of accounting information, and protect theinterests of investors.

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