CEO Tenure And Earnings Management Based On The Pay-performance Sensitivity Incentive Mechanism

The listed companies in the capital market should disclose the real financial information to the public on time,among which the earnings information is the core of the financial information.Earnings management not ouly mislead the decision of the wide investors and other stakeholders,but also do harm to the company' s future development in the long run,and affect the capital market resource allocation efficiency.With the continuous development of domestic's capital market,the issue of earnings management has been paid more and more attention.Therefore,it is a hot issue to study the motivation and means of earnings management in order to avoid the financial problems caused by earnings management and promote the sustainably healthy development of listed companies in the theoretical physical world.In the listed companies,important economic decisions are made by senior managers.As the power center of senior executives,CEO is the key for enterprises to improve their core competitiveness and gain a foothold among multiple competitors.CEO tenure is one of the most important personal characteristics of CEO,which contributes to a company's good performance and future healthy development.The length of the CEO tenure shows different management styles,adopt different management strategies and management thinking so as to affect the quality of enterprise's surplus and performance,and in turn affect CEO compensation and reputation.The different period of CEO based on different motivation will be different degree of manipulation of the surplus of the enterprise,affect the performance of the enterprise and the interests of the users of financial information.Therefore,it is great theoretical and physical significance to explore the influence of CEO tenure on earnings management of the listed companies.The two-fight separation system makes the board not directly participate in the management company,so they can not directly get the company's earnings information.As the chief executives of the information dominant party,CEO takes the surplus management behavior to achieve some purposes.To help solve the problem of agency,the listed company set up surplus index as the sweat to standard pay compensation incentive management,it is of great importance for the establishment of such incentive to arouse the enthusiasm of managers,perfect corporation governance structure and promote company's sustainable development.But according to the principle of rational economic man,CEO will maximize his utility to pursue the higher pay by earnings management and also have the motivation to manipulate earnings in order to carry on their own pay levels.So there is no conclusion now if pay-performance sensitivity incentive mechanism has a positive effect on corporate governance.This paper combines CEO tenure,earnings management and pay-performance sensitivity incentive mechanism based on reputation mechanism theory,CEO tenure stage theory,principal-agent theory and incentive theory,analyzes CEO's motive and degree of earnings management at different stages,then studies pay performance sensitivity incentive's influence as a regulated variable to CEO tenure and earnings management,and finally put forward reasonable suggestions aiming at the relative CEO tenure and CEO incentive mechanism so as to enrich theory research and improve the governance of listed company environment.This study includes the following sections:The first part is an introduction.Main article describes the background,significance,research framework and contents and summarizes the innovation of this paper.The second part is the literature review.In this paper,it reviews correlation studies between CEO tenure and earnings management and studies of factors which impact on the relationship of pay-performance sensitivity incentive and earnings management,and both of domestic and abroad literature are reviewed.The third part is the theoretical analysis and assumptions.This part introduces the related concepts and the theoretical basis,then puts forward the hypothesis based on the theories.The fourth part of this article is study design.It introduces the selection of study sample,the source of the data,design of the model and significance of the model's variables.The fifth part is the empirical research part of the paper.On the basis of the above hypothesis,this paper adopts the market data in listed companies to operate empirical research.The sixth part includes conclusions of this study,policy advice and research limitations.The innovation of this paper is to study the relationship between the entire tenure of CEO and earnings management,rather than to discuss the relationship between CEO's change in early years of late year and earnings management.Secondly,based on the unique perspective of the pay-performance sensitivity,the paper take the pay-performance sensitivity incentive as regulated variable to study the effect in the relationship between CEO tenure and earnings management.In this paper,the empirical results indicate that there is a U-shaped relationship between CEO tenure and earnings management,the pay-performance sensitivity incentive strengthens CEO's earnings management at the early years of CEO,then the strengthening effect restrains earnings management step by step,and strengthens earnings management again in CEO's late year.