Research On The Effect Of Compensation Gap On Earnings Management From The Perspective Of Accounting Conservatism

Executive compensation management is an important topic for micro-governance of companies,and it is also a problem that plagues many countries in the world.In recent years,China's economy has developed rapidly,and the compensation gap has soared.The hidden mechanism that may exist behind its incentive effect has become a hot topic of current social concern.From 2009 to 2015,the Government-imposed pay curbs which regulate the pay gap between the heads of state enterprises and workers are the best policy response.In modern corporate governance,executive compensation contract is an incentive mechanism,which can effectively alleviate the agency problem caused by the separation of ownership and control.Incentive mechanisms that highly correlate pay gaps with company performance in pay contracts are easily used by executives to manipulate earnings,so the quality of the information that reflects the company's performance is particularly important.Therefore,the information quality of the accounting information that reacts to the company's performance is particularly important.As a basic practice of accounting confirmation and measurement,accounting conservatism is one of the economic consequences of improving the validity of the contract.It requires the accountants to carry out conservative accounting treatment,not overestimate the assets and benefits and do not underestimate liabilities and losses.The use of accounting conservatism makes the executive's opportunistic behavior greatly re duced by overestimating the assets and earnings to achieve the agreed performance in the compensation contract,and reduces the space for earnings management.Based on the above theoretical basis,this paper takes the data of China's 2009-2016 A-share listed company as a research sample,introduces accounting conservatism,and empirically examines the relationship between executive-employee compensation gap and earnings management.It is found that there is a range effect between executive-employee pay gap and earnings management.There is an inverse U-shaped relationship between internal pay gap and earnings management.This shows that the greater the internal pay gap,the higher the degree of earnings management,and when the pay gap exceeds the critical p oint At that time,the level of earnings management will be reduced.Conditional conservatism and non-conditional conservatism can all reduce the degree of incentives for earnings management.But the effect of non-conditional conservatism is more significant.To further classify property rights,the results of the study show that in state-owned enterprises,the wage-reduction order is passed through the executive conduction to the remuneration mechanism,which in turn suppresses the earnings management beha vior induced by the remuneration gap.Non-conditional conservatism can play a significant role in the regulation of the two kinds of enterprises,while the conditional conservatism plays a weaker role in the state-owned enterprises than private enterprises.Therefore,the government-imposed pay curb supplements the weakening of conditional robustness on accounting standards.In private enterprises,there is no rigid constraint on the pay gap policy.So a good accounting system,such as a sound accounting system,is needed.Fundamentally constrain the opportunistic earnings management behavior of senior executives so that the interests of related parties can be maintained.The research conclusions provide experience and inspiration for the policy orientation of China's enterprise compensation system reform.And at the same time provide reference for the formulation of China's accounting standards.