The Influence of Executive Compensation Gap on Earnings Management from the Perspective of Media Supervision: Evidence from China

To pursue higher compensation, the agent’s earnings management behavior may damage the principal’s interests. Can managers whose compensation reaches the expected level seek benefits for the company through earnings management? This study takes China’s A-share listed companies from 2014 to 2018 as samples. The conclusions show that managers with higher compensation levels will carry out earnings management in favor of the company while taking their own interests into consideration. For companies with stronger profitability, the higher the managers’ compensation is, the more they are inclined to reduce accrued earnings in the current period to further reduce taxes and fees. For companies with weaker profitability, managers with higher compensation tend to choose to increase real earnings to further optimize financial indicators. It has been found through further research that high pressure generated by media attention can make well-paid executives restrain the above earnings management behavior, which serves as an effective method to protect investors’ rights and interests.