Study On Impact Of Earnings Management On Top-managerial Compensation Of State-owned Listed Companies

In the context of the separation of ownership and operating rights of modern joint-stock enterprises, management compensation plays an important role in resolving this issue. In China, the most listed companies are state-owned, which occupy an important position in the national economy, so top management compensation is important for development of companies. Top management compensation of Chinese state-owned listed companies has been highly concerned in theoretical circles and business circles. In addition, with the broke out of a series of corporate accounting scandals, the research of earnings management and management compensation has attracted increasing attention. Thus, the critical issue here is whether top managers have a motive to carry out earnings management for their own compensation in such companies, and what is the relation between earnings management and top management compensation. The research of these issues is benefit for improving top management compensation and the quality of disclosure of earnings information.From the perspective of earnings management, the paper studies issues of the top management compensation of state-owned listed companies. This paper firstly makes a review of the relevant theories and literatures of top management compensation incentives and earnings management. Then using the relevant theories, it analyzes the relationship between company performance and top management compensation, and the effect of earning management on top management compensation and sensitivity of performance-related compensation to. This paper selects the cross-sectional adaptation of the modified Jones model to estimate discretionary accruals, and chooses the samples of all Chinese state-owned listed companies which issued A-share both in Shanghai Stock Exchange and Shenzhen Stock Exchange during the period through 2006 to 2009. Through the analysis of regression models, we test the hypothesis of this paper, and furthermore study the rationality of top management compensation of state-owned listed companies.Theoretical analysis and empirical research investigate existence of top managers using earnings management to increase discretionary accruals for their own compensation which are designed based on company accounting performance in Chinese state-owned listed companies. The company performance is significantly positively correlated to top management compensation. The level of earnings management is higher, top management compensation is higher and relation between compensation and company performance is tighter. It means earnings management has a positive impact on top management compensation and also on sensitivity of performance-related compensation. This paper provides suggestions for improving top management compensation incentives and the quality of disclosure of earnings information. Lastly, the limitations of this research and directions of future research are summarized and analyzed.