does ownership structure affect the motivation of compensation contract of earnings management —from china’s data所有权结构影响盈余管理的动机的补偿契约u2014u2014从中国的数据.pdfVIP

Journal of Service Science and Management, 2011, 4, 351-356 351 doi:10.4236/jssm.2011.43041 Published Online September 2011 (http://www.SciRP.org/journal/jssm) Does Ownership Structure Affect the Motivation of Compensation Contract of Earnings Management? —From China’s Data Jing Long, Yanxi Li, Xiuwen Xu, Linlin Fu School of Management Economics, Dalian University of Technology, Dalian, China. Email: longj@, mrliyx@, {xxw133, franfulinlin}@ Received July 10th, 2011; revised August 16th, 2011; accepted August 25th, 2011. ABSTRACT This paper is to explore that if ownership structure exactly affects on earnings management, especially on how to con- strain executive compensation motivation to earnings management in the emerging market of China. We use five vari- ables to quantify various corporate governance mechanisms including ownership structure and executive compensation for 1024 listed firms sample within two years. We find that earnings management is positively affected by executive compensation motivation, while this influence is constrained mostly by ownership concentration. This finding reflects the current situation for the weak corporate governance in the emerging market of China. Therefore, such a significant relationship is useful to control level of earnings management and improve the China’s emerging market developing healthily, stably and harmoniously. Keywords : Ownership Concentration, Executive Compensation, Earnings Management, Corporate Governance 1. Introduction shareholders, there is a good separation between the ownership and the power of operational management, in Over three hundred years ago, Adam Smith raised the