Research On The Influence Of Fair Value Measurement On Incentive Mechanism And Accounting Behavior

In2007, the new accounting standards for business enterprises were imple merited in our country, which introduced fair-value measurement attribute mode rately and prudently. It has been more than six years so far. Income statement in our country has carried on the reform in2009. From then on, the gains a nd losses, include changes in the fair value, which are directly included in ow ners’equity, will be included in "other comprehensive income" project of the i ncome statement as well. And it will be a part of "total comprehensive incom e", together with the net profit. As we can see, fair-value measurement has be come increasingly important in measuring the accounting performance. At the s ame time, with the constant improvement of market economy in our country, t he executive compensation contract which is based on the corporate performanc e has a more and more significant incentive function. So, what role does fair value accounting information play in the executive compensation incentive mec nanism is an important question, which is studied in this paper. Docs fair valu e accounting information affect enterprise executive’s accounting behavior, and how to influence the effectiveness of executive compensation contract finally is studied as well.On the basis of studying the relationship between executive compensation and the fair value measurement of all companies, we choose some companies, which have higher proportion of financial assets accounting for assets, as the f urther research object. Then we do our best to find whether the executives use financial assets, which is measured by fair value and convenient for profit ma nipulation, to manipulate profits and realize the purpose of earnings manageme nt. After the theoretical analysis and empirical analysis, we find that:1) Fair value accounting information affects the executive compensation, but th e positive and negative asymmetry exists. The changes in the fair value, which are directly included in owners’equity, have a significant influence on executi ve pay compensation as well, but the incentive coefficient is lower than traditi onal accounting performance.2) The companies, which have higher proportion of financial assets accounting for assets, also have higher proportion of available-for-sale financial assets for financial assets. And the correlation between executive compensation and accounting performance is stronger as well. But their executive compensations do not fluctuate with the market fluctuations, still showed a trend of increasing.3) Compared with the companies which have no changes in fair value, the executive compensation of the companies having changes in fair value is higher.4) The companies, which have higher proportion of financial assets accounting for assets, if their executive compensation has a stronger correlation with ROE, the executives tend to dispose financial assets when enterprise performance declines.Combined with the above points, we can infer that some executives control the changes in fair value by choosing the classification of financial assets and disposing financial assets. And then the profits and ROE are affected for the purpose of improving the executive compensation. That is to say, fair value measurement attribute has led to some executives’profit manipulation behavior, which reduces the effectiveness of executive compensation contract, to a certain extent.