Business, Management and Accounting
8 years ago

Executive pay linked to shady accounting practices in Chinese companies.

Advances In Management
Case Study: Executive Compensation and Earnings Management: Empirical Study in China's Listed Companies
Jie Zhou, Zuo Ling Yan

Paper Summary

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Executive compensation in China's listed companies is linked to earnings management, where managers manipulate financial reports to increase their pay. By analyzing data from 2006 to 2010, it was found that managers use discretionary accounting choices, especially for extraordinary items, to boost their compensation. This shows a positive correlation between executive pay and earnings manipulation. The study also highlights the importance of improving earnings quality and standardizing earnings management practices in Chinese listed companies.