Information Transparency,Effectiveness Of Compensation Contract And Value Relevance Of Accounting Information

Why accounting information related to decision-making? It is one of the core issues of accounting theory research.The existing studies typically rely on the efficient market hypothesis to explain this problem.However,the promotion of fair value information show that,using the efficient market hypothesis to explain this problem is not reasonable.According to decision usefulness view and commission responsibility view,accounting information plays two roles in capital market,which are decision usefulness and contract usefulness.Recently, researchers began to focus on the correlation between these two roles.These studies believe that the valuation role and incentive role are not independent or opposition, but has positive relation.And it provides a perspective for value relevance of accounting information,that is,whether through the role of accounting information in the compensation contract to study.Therefore,this paper attempts to research the relationship between effectiveness of compensation contract and value relevance.However, the effectiveness of executive compensation contract are non-observability,we need to distinguish the effectivenes of pay contract.Because there is some correlation between compensation contract and information transparency, so this paper uses the information transparency to distinguish.Using Chinese A-share listed companies in Shenzhen security market from 2007 to 2013 as research samples, this paper put information transparency as the starting point,to study the influence of executive compensation contract on the value relevance of accounting information.The empirical results proved that:(1) The higher the information transparency of company is,the more efficiency the compensation contract it will be. Specifically,the sensitivity of compensation to performance is higher in company which with higher transparency.And information transparency can reduce the asymmetric sensitivity of compensation between profits and losses.The results show that the effectiveness of contract related to information transparency,it can be distinguish by information transparency. (2)the value relevance of accounting information is higher in the company which with more efficiency on compensation contract,and it is significant effect on the value relevance of earnings per share.However, the influence of the value relevance of net assets per share is not obvious.The result means that the validity of compensation contract is a factor in influencing the value relevance of accounting information. (3)According to the importance degree, influencing factor can be split into four categories:determining factor,major factor, basic factor and little impact factor.It have a large amount of data test showed that the effectiveness of compensation contract is not determining factor,but the major factor.The effectiveness of pay contract is connected with value relevance of accounting information. If a company has a higher value relevance of accounting information,the main reason lies in the validity of compensation contract,which acts as a non-substitutable effect.The conclusion indicate that improve the corporate governance mechanism, strengthen executive incentive effect is a effective way to increase the value relevance of the accounting information.