An Empirical Analysis On The Relationship Between Fair Value Measurement Used In Financial Assets And Executive Payment

Under the background of recent trends that accounting standards are moving towards international standards, February15,2006, China issued new accounting standards that actively and carefully introduce the concept of fair value, which is consistent with the development trend of international accounting measurement, and also meets the requirements of China’s economic development. Among them, the " No.22Accounting Standards-Financial Instruments Recognition and Measurement", as the representative of the17specific accounting standards, uses the fair value measurement attributes, and also disclosed "fair value through income" in the2007regular report for the first time, which provides a research opportunity for fair value accounting. In2007financial crisis in U.S. arouses concern about the fair value, on one hand, enterprises trapped in financial difficulties and relied on governmental relief, on the other hand, executive pay raised oppositely. Management payment continues to rise, which makes the government has to regulate it by the regulatory of salary limitation. The executive compensation, which is focus of academic research and practice, has become a hot topic again.This paper which is based on the fair value changes in financial assets, investigates fair value changes in trading financial assets (affects income statement items), and fair value changes in sale financial assets (affects balance sheet), both of which has impact on executive compensation, and furthermore, this paper subdivides the fair value change into positive changes and negative changes and examine its impact on executive compensation. In this paper, pick up the data sample of2007-2010China A-share listed companies, and use change models, and then discuss its impact on executive compensation by different direction of fair value changes in financial assets. This article is divided into the following six parts:Chapter0is introduction. The section firstly describes the background of this research and explains the significance of this study, and then described, respectively, these two issues of research ideas and research methods of articles and papers framework. Chapter1is relevant literature review. This chapter begins with two aspects of the fair value and executive compensation from the review of foreign researchers, then reviewed the domestic scholars on this proposition, and finally give s the comment on the literature review. Chapter2is an overview of the theory of financial assets at fair value measurement and executive compensation. The chapter begins with a brief description of these two basic concepts of fair value and executive, and then introduces the economic consequences of the doctrine, the function of locking hypothesis, agency theory and incentive theory. Chapter3is for the theoretical analysis and underlying assumptions of the financial assets at fair value measurement and executive compensation. The chapter first analyzes the impact of the financial assets measured at fair value on executive compensation, and then raised in the theoretical analysis based on the assumptions of this article. Chapter4is empirical analysis. The chapter begins with the sample selection, data sources and variable design descriptions, instructions, and then the sample data packet descriptive statistics, correlation analysis, multiple regression analysis to examine the financial assets measured at fair value and management the relationship between the remuneration and impact, and draw the regression results with good robustness of the conclusions. The results show that:(1) The introduction of fair value measurement attributes in the incremental sense to improve the relevance of accounting performance and executive compensation contracts. This conclusion provides empirical proof that fair value measurement gives decision-making information to stakeholders.(2) The empirical results of functional fixation hypothesis shows that fair value changes of trading financial assets (affecting the income statement) have a greater influence on executive compensation than the fair value changes of sale financial assets (affect the balance sheet) on the impact of salary. Conclusions of this study also provides further evidence that same or similar information statements listed in the difference of position have different impact of information, and the conclusion also supported that authorities may be motivated by compensation to manipulate the classification of the financial asset.(3) The empirical analysis on viscous hypothesis of executive pay shows that the positive fair value changes of trading financial assets are more significant on executive compensation, while a negative fair value change of trading financial assets has little impact of changes in executive compensation. In addition, fair value changes of financial assets both positively and negatively have little impact on executive pay. This phenomenon may be because the pay system is just introduced to changes in fair value, as a result, pay system settings have some "overreaction" and "inadequate response". Chapter5is the research conclusions and recommendations. The chapter first retrospect the foregoing analysis, then make some suggestions from construction of the market, and rules and regulations of the market and improvement of income statement, and finally illustrates the inadequacies of this paper.