Executive Compensation, Mass Media And Earning Management

This paper is an empirical research on the relationship among earning management, executive compensation and the mass media. This study is intrigued by the fact that the negative report over executive compensation of Chinese listed companies is always followed by positive report over investment and earning. That's why the author raises the question that whether the executives will enlarge the earning when meeting compensation accusation by the mass media?The paper selects listed companies in monopoly industries as research group because the executive compensation of Chinese monopoly industries has been a hot topic since 2005; while uses listed companies of non-monopoly industries as reference. By conducting Panel Data Model and Logistics Model, the paper gets solid conclusions to answer the four questions developed from the original question.According to the results of empirical studies, the paper points out that:1) Listed companies of Chinese monopoly industries shows a higher presence of earning management, especially enlarging earning.2) The quantity of report on mass media has a negative impact on executive compensation. This effect applies to listed companies from both monopoly industries and non-monopoly industries but is stronger on those from monopoly industries.3) There is a mutual positive impact between executive compensation and earning management. That is, high executive compensation drives up the behavior of enlarging earning while the enlarged earning will drive up executive compensation next year. Also, this effect applies to both groups but is stronger on listed companies of monopoly industries.4) When the executive compensation is high, reports on mass media will increase the possibility of positive earning management.Based on these four empirical conclusion, the paper raised management implications on executive compensation, earning management and the supervision role of mass media accordingly.