Dilemma Of Earnings Management Positioning In Executive Compensation Incentives

Different from previous studies whether executive compensation incentives will lead to profit manipulation, the purpose of this paper is to study the mechanism and evaluation of earnings management positioning in executive compensation incentives in order to help shareholders filter out "noise" for efficient incentives when designing an executive compensation incentives mechanism. The paper finds: (1)With discretionary accruals rising, incentive effects become worse, which means that earnings management is the "noise" factor that influences executive compensation incentives operation and effect evaluation. (2) High degree of upward earnings management will increase "noise" and reduce the incentive effects while high degree of downward earnings management will reduce "noise" and improve the incentive effects. Based on earnings management, this paper reveals inherent mechanism of how the "noise" in executive compensation incentives comes into being and plays a role by empirical research.