A Study on the "Pay Ceiling Order" and Economic Consequences in Chinese State-Owned Firms

The salary level of executive compensation in Chinese listed companies has been the focus of theoretical and practical circle, and it perhaps bring some economic consequences on the firm accounting performance and the capital market operation. This paper firstly introduced the background of the "Pay Ceiling Order" of executive compensation in the state-owned firms, and then analyzed the reasons and means of its implementation. Furthermore, the influence owing to the "Pay Ceiling Order" on the transparency of accounting information has been discussed, which takes earnings management, on-the-job consumption and audit quality into consideration. Finally, the author puts forward the related policy suggestions to solve the supervision of managers over high compensation.