Research On The Relationship Among Contracts As Reference Points Of CEO's Compensation,Promotion Expectations And Earnings Management

Earnings management is the consequence of corporate management using accounting or non-accounting methods to adjust corporate profits,to mislead stakeholders who make decisions based on company performance,or to influence contracts based on corporate profits.In the listed companies whose ownership and management rights are separated,in order to reduce the agency cost,the company tends to formulate a salary incentive system in which the manager's salary is linked to the company's profit.In addition,because the manager compares the psychological factors,the manager will not only pay attention to the absolute number of his own salary,but also compare it with the salary of others,and the result of the comparison will be Encoded in the minds of the manager as gains or losses,which in turn affects the level of effort of the manager.When the manager fails to achieve the expected level of profit due to insufficient efforts,in order to more cater to the established contract system,the level of earnings management will be increased,and earnings management is also an alternative compensation to make up the formal contract,but this behavior It reduces the usefulness of decision-making of accounting information,misleads the decision-making behavior of information users,and even seriously damages the relevant interests of information users.Based on the principal-agent theory and the contractual reference point theory,this paper selects the core personnel in the management team--CEO,and takes the salary as the research object,and comprehensively studies the literature on the compensation contract reference point and earnings management at home and abroad,respectively.The reference point of the reference point and the horizontal reference point are used to measure the CEO compensation contract reference point,establish the regression model of CEO compensation and earnings management under the contract reference point,and measure the degree of earnings management from the aspects of accrued earnings management and real earnings management;To the reference point dependence preference and loss aversion psychology,further divide the relative salary under the contract reference point into the benefit area and the loss area,and compare whether there is a significant difference between the relationship between the relative salary of the two regions and the degree of earnings management;Finally,due to the promotion of the position,the CEO can bring reputation and prestige,more salary and other benefits.When the CEO is promoted,he will give up part of the salary before promotion to improve the chance of getting more salary in the future.Therefore,this paper introduces the promotion expectation variable.To explore the promotion of expectations and the relative salary and surplus of the CEO under the contract reference point effect Reasonable regulation.Through the regression of the annual sample of 14150 A-share listed companies from 2010 to 2017,the paper draws the following conclusions:(1)The lower the CEO's relative salary under the role of the compensation contract reference point,the higher the company's earnings management;(2)Compared with the CEO with relative salary in the benefit area,the CEO in the loss area has a higher degree of earnings management;(3)Under the effect of the compensation contract reference point,the promotion expectation significantly reduces the impact of the CEO's relative salary on earnings management.The innovation of this paper is:First,this paper attempts to explore the adjustment effect of promotion expectation on the correlation between CEO's relative remuneration and earnings management under the effect of salary contract reference point,which provides a reference for the company's CEO compensation system.On the basis of the optimal contract theory,we must fully consider the implicit reference incentive effect of the contract reference point effect and promotion expectation,so as to determine the best CEO compensation structure and reduce the motivation to manipulate the surplus.Secondly,using the contract reference point analysis framework designed in this paper to explore the relationship between CEO's relative compensation and earnings management,further explain the reasons why the optimal contract theory may be invalid,and fully consider the real earnings management and accruals when measuring the earnings management.Earnings management has broadened the scope of research on the motives of earnings management contracts.