Abstract: Management compensation is an important part of the constrain mechanisms for the earnings management. The listed companies during the period of 2006-2008 are chosen as research samples both in Shanghai and Shenzhen Stock Exchanges from angle of the management compensation contracts, the modified Jones model is used to calculate the discretionary accruals which is used to measure the extent of earnings management. Then a regression model for the examining the relationship among management salaries, management shareholding, and earnings management is constructed.

Key words: earnings management, management compensation contract, stock incentive, discretionary accruals