Notice of RetractionOwnership Structure, Executive Compensation and Earnings Management - An Empirical Research on China's Listed Firms

Abstract

This paper empirically studies the impacts of various corporate governance mechanisms on earnings management of listed Chinese firms from 2006 to 2008. We use eight variables to quantify various corporate governance mechanisms including ownership structure and executive compensation for 3468 listed firms sample. They include the concentration of shareholding among the ten largest shareholders, whether the controlling shareholder is state-owner, number of the board, proportion of independent directors, whether the CEO is the head of the board, number of board meetings, executive compensation, shareholding of top executives. We use dealing accruals to measure earnings management. We find that, on average, earnings management is negatively affected by concentration ownership and executive compensation, while it is positively influenced by whether the ownership of the firm is state-controlled. This finding reflects the current situation of corporate governance in most China's listed firms. Therefore, such a significant relationship is useful to control level of earnings management and improve the China's capital market developing healthily, stably and harmoniously.