Research On Managerial Incentive And Accounting Conservatism

Since global financial crisis in2008, accounting conservatism has become a popular topic.Accounting conservation is an effective governance mechanism. It not only can easy the problemof asymmetric information, but also can provide effective information for the supervisor.Therefore, it is necessary to make an empirical research on managerial incentive mechanism andaccounting conservatism. At the same time, the research can help us find better method toimprove accounting conservatism from the aspect of managerial incentive.The paper bases on managerial incentive and empirical data listed on Shanghai andShenzhen during2010to2011. First, the paper uses Basu model to test the existence ofaccounting conservatism. Second, the paper applies modified Jones model to estimate the levelof earning management. On the basis, the paper makes a series of correlation regression analysis,including the relationship between the executive compensation incentive, the equity incentive,the implicit incentives and earnings management. Third, the paper has carried on the multipleregression analysis about Earnings management and accounting conservatism so that we canexplain the relationship between them. At last, in order to validate the consistency of theempirical study, this paper joins executive compensation incentive and shareholding incentiveand interaction into the basic model.The empirical results show that: Chinese listed companies on Shanghai and Shenzhen existin the characteristic of conservatism as a whole; Listing companies have strong earningsmanagement behavior. The more correlation compensation and shareholding is, the largerearnings management behavior is. There is a negative correlation relationship between implicitincentives and earnings management but not significant; Therefore, we can conclude that: Thereis a negative correlation between executive compensation incentive, executive equity incentiveand accounting conservatism; Executives recessive incentive and accounting conservatism doesnot exist significant correlation.