Senior Managers’ Stocks Adding And Reducing, Earnings Management Using Classification Shifting Abstract

The modern enterprise separation of ownership and that the separation of ownershipand management rights to promote the development of enterprises, it also brings some ofthe side effects can not be ignored: the agent direct control of the business enterprise,with professional skills and business to occupy the information superiority position. Theowner does not participate in the operation, the understanding of the enterpriseinformation is limited, and often on the surface. Information asymmetry between theowners and operators, derived from the principal-agent problem. Real economic life,inconsistency between principal and agent utility function: owners of capital as theprincipal has a residual claim, his pursuit of the goal is to maximize profits. Managershave control over the company as an agent of the owner, in addition to the pursuit of ahigher monetary gains also seeks to get more non-monetary items. Some alternative costbetween monetary income and non-monetary items that agents of the pursuit ofnon-monetary items will lead to rising corporate costs and the decline in corporate profits,which conflicts with the interests of the principal objectives, which is called agentproblem. So how to solve the principal-agent problem become the hotspot of modernaccounting research.Separation of business and ownership, leading to the emergence of the principal-agent problem. Solve the principal-agent problem, you must establish an effectiveincentive mechanism, with the split share the propulsion reform and perfect capitalmarkets, more and more executives of listed companies held by the company’s shares,which can resolve the inconsistencies of the operators and the interests of investors.Confirmed by the survey, such incentives first appeared in the fifties of the last century,the United States, three years later, began to prevail in the West, have developed rapidlyin the nineties. By the end of2008, more than half of the listed companies in the UnitedStates, according to Statistics executive stock ownership incentive plan. But studies haveshown that executives held stock will also bring some negative effects, for example,executive stock ownership of listed companies will lead executives use control overearnings management, to the detriment of the interests of investors. Continuouslyimprove corporate governance, the role of executive stock ownership incentive maygradually appear in the continuous improvement of corporate governance under thepremise that increasingly significant inhibitory effect on earnings management.Executives overweight or underweight stocks with earnings management related how?And executives use what means to manage earnings?In view of this, would like to study the relationship between changes in executivestock ownership and earnings management of listed companies in China, and helpinvestors to find new means of earnings management. In this paper, using a combinationof analytical and empirical analysis of normative analysis method, combined withchanges in the practice of executive stock ownership of listed companies in China to thetheoretical as well as empirical research, trying to between executive ownership changesand earnings management of listed companies from the perspective of empirical data reveal relationship. In this paper, the principal-agent theory, the quality of accountinginformation theory, information asymmetry theory, contract theory held on executivechanges in the behavior of the theoretical analysis, and the executives held listedcompanies as research samples during year2008to2011, establish a core profit modeland executives held Change, the main variables in the econometric model of therelationship between earnings management and model descriptive statistical analysis andempirical analysis, and conclusions found:According to the above theoretical analysis and empirical research and analysis, we candraw the following conclusions:(1) the phenomenon of earnings management executives in the holdings of the stockprocess significantly, and the executive is classified by the core profit transfer of thissurplus means the surplus manipulation. Executive holdings in order to pursue their owninterests, to maximize core profit is also known by the classification of costs transferredclassification transfer down accounting earnings management, and thus reduce the cost ofits holdings;(2) of the asset-liability ratio of listed companies are more likely to manage earnings.The larger the size of the company, the more vulnerable the supervision of the regulatoryauthorities, thereby minimizing its earnings manipulation. The better the performance ofthe company to increase its stake process but rarely earnings management.