The Research On The Influence Of Changes In Fair Value On Senior Executive Remuneration

"Accounting Standards for Business Enterprises"(2006) issued by The Ministry of Finance of PRC, which was substantially convergent with IFRS, introduced fair value calculation attribute positively and prudently on January1,2007. Seventeen specific standards of them refer to the measurement attribute of fair value, to improve the quality of accounting information and enhance the accounting relevance.This thesis regards the contract concept as the starting point to study the influence of changes in fair value on senior executive remuneration. Theoretical research part contains defining the relevant concepts, combing out and summing up the previous research, and also constructing the analysis framework on the foundation of Principal-agent Theory, Contract Theory and Motivation Theory. It points out that the use of fair value, on the one hand, can improve the decision usefulness of information about accounting performance, in order to reflect the ability and efforts of executives which can effectively enhance the incentive function of executive compensation; the use of fair value, on the other hand, may also aggravate the executives’laziness and reduce the constraints on executive compensation. Then, the part of empirical research contains selecting a sample of A-share nonfinancial firms affected by the fair value measurement during the year of2009and the year of2012, establishing the "Remuneration-Performance" Sensitivity Model and Asymmetry Model and testing the sensitivity and asymmetry of the remuneration to changes in fair value. The empirical results show that the introduction of fair value enhances the contract relationship between accounting earnings and executives compensation on the incremental level and plays a positive role in promoting the stimulation validity of executive compensation; in the condition of relatively stable capital market, the asymmetry of company performance and executive compensation also exists at the level of air value measurement.There are three possible innovation points in this thesis. First of all, it is the selection of the research perspectives. This thesis can make a thorough probe into the economic consequences of fair value accounting from the contract perspective. Second, it is the selection of the research objects. This thesis brings "Net gain or loss from fluctuation in fair values" and "Changes in fair value directly included in the equity" in the research scope. Third, it is the selection of the samples. The thesis selects the sample years during the year of2009and the year of2012. This can help assess the influence of accounting earnings measured by fair value on senior executive remuneration contracts precisely and comprehensively.