Executive Payment, Political Connection and Earnings Management—An Empirical Research Based on the A-share Public Board Listed Companies in China

Abstract

Under the special institutional background of China's capital market, political connection is an important form of interaction between government and enterprises. Based on the data of Shanghai-Shenzhen A-share stock markets from 2010 to 2016, this paper analyzes the influence of executive payment on earnings management, and analyzes the regulatory mechanism in which political connection plays a role. The study has found that executive payment is significantly and positively correlated with accrued earnings management; political connection negatively regulates the relationship between executive payment, accrued earnings and real earnings management.