Accounting Information And Executive Compensation Incentives

It is a challenging task to conduct research on the compensation of managerial incentive contracts based on the accounting information theory. In China,this issue has not been brought into attention until recently. However,there is still a lack of consistent,comprehensive,and valid research findings,leaving much to be done both in theory and practice.This dissertation begins with a discussion on the innate nature of information and accounting information,and then using this as a cutting point in search of theoretical improvement on accounting recognition,measurement,recording,and disclosure,followed up by exploring the possibility of incentive mechanism under conditions of asymmetric information in accordance with incentive theory.Secondly,accounting,essentially is an information system,needs to have control over accounting information system,thus giving rise to studies on controlling theories of the accounting information system. By resorting to theories of control,efficient markets hypothesis,information,interest interrelation,public choice,as well as regulation theory and principal -agent theory,this paper gives an extensive coverage on how the accounting system acts in the cycle of supply,control and needs,thus leading to a theory upon which to build a system of compensation of managerial incentive contracts by the use of accounting information theory.Thirdly,based on a review of existing literature on accounting information and the compensation of managerial incentive contracts,this paper gives a mathematical model for claiming residue income among shareholders,managers,and governments by applying game models,which provides a theoretical framework for explaining and devising components of management income and the compensation of managerial incentive contracts. Currently,two views are held about the role of accounting information in determining the compensation of managerial incentive contracts. Some think that accounting has become relatively less important in this regard while others maintain that accounting information has information content value with which we can explain and decide compensation of managerial incentive contracts. In the paper,the author presents an incentive contract model for stimulating action and balancing effort through managerial behaviour,and in the meantime discusses the importance of relative weights of sensitivity,accounting and stock income measures in incentive contracts. By analyzing how accounting information acts upon the compensation of managerial incentive contracts,this author holds that accounting information can be employed to evaluate and compensate managerial efforts,and then further explores approaches to performance measurement,the importance and limitations of the relative performance evaluation (RPE). In addition,mention is also made of ways of designing incentive contracts for business unit managers in the hope of finding solutions to issues regarding inter-division interdependencies,task allocation,interactions between compensation and innovation and ratcheting of performance standards.Fourthly,the author puts forward the content and form requirement of accounting information,i.e.,the significance and characteristics of high quality accountinginformation,as is needed to achieve the objectives of incentive mechanism,by probing the channels through which accounting information affects the objectives of incentive mechanism and the manner in which the incentive mechanism of accounting information vary with other factors.With a view to setting up a compensation of managerial incentive contract,the author also elaborates on how to design a high quality accounting system to live up to expectations of accounting information reliability,optimal information content,reducing information asymmetry and satisfying different interest groups.Based on review of literature about the impacts of accounting information on the compensation of managerial incentive contracts,an empirical study has been done on the managerial compensation plans of Shenzhen and...