Does Ownership Structure Affect the Motivation of Compensation Contract of Earnings Management? —From China’s Data

This paper is to explore that if ownership structure exactly affects on earnings management, especially on how to constrain executive compensation motivation to earnings management in the emerging market of China. We use five variables 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.