The Effect Of Media Coverage And Board Independence On Listed Companies' Earnings Management

The research on earnings management of listed companies has always been a hot topic in the field of practice and academia.With the continuous development and improvement of the capital market,the influence of internal and external governance mechanisms such as media attention and board independence on the company's earnings management has become increasingly prominent.In China's capital market,can the media,as an extra-legal governance mechanism,have a governance effect on earnings management?The board independence is an important internal corporate governance mechanism and the question of "Rubber Stamp" has always existed.Can it fulfill its supervisory function?The media is the intermediary of social information,which helps to reduce the degree of information asymmetry in the capital market and reduce the cost of information acquisition.As an important internal corporate governance mechanism,the board independence is constrained by the access to information.It means that the single corporate governance mechanism is limited.We need to find the interactive influence of the board independence and the external governance mechanism of the media on corporate governance.Therefore,it is necessary and important to study the interactive effects of the two kinds of internal and external governance mechanisms of media attention and board independence on the earnings management of listed companies.In view of this,based on information asymmetry theory,principal-agent theory,and resource dependence theory,this paper has carried out a lot of research on the influence of media attention and board independence on the earnings management of listed companies,hoping to provide new benefits for company stakeholders to identify earnings management,and provide reference for the government and regulatory agencies to introduce media and other external governance mechanisms.This paper improves the independent director system and improve the quality of earnings information.At the same time,it also provides guidance for listed companies to rationally allocate board seats and select independent directors.This article mainly studies from the following six chapters:Chapter I,Introduction,expounds the research background and significance of this article,defines the concepts of media attention,board independence and earnings management,and combs the overall research content and research ideas of this article.The technical route of this paper is introduced.Chapter II is a review of related research at home and abroad.It first describes the research on earnings management,media governance,and the independence of the board of directors.It then reviews existing literature and lays the foundation for follow-up research.Chapter III,an Empirical Study on the Relationship between Media Attention and Earnings Management.Considering the differences in the property rights of listed companies and the influence of the media environment on media governance,the paper comprehensively analyzes the media's attention to the supervisory and governance functions of the external governance mechanism and the real earnings management approach.Chapter IV is an empirical study of the relationship between board independence and earnings management.Based on the fact that board independence proxed by the ratio of independent directors is a flaw,we consider introducing the role of independent directors in different backgrounds to measure the strength of board independence.The difference in difference model and mixed estimation model are used to reveal the differences in the influence of official independent directors and technical independent directors on the earnings management of listed companies,and a comprehensive analysis of the internal governance mechanism of the board independence to the governance of real earnings management.Chapter V,the cross-impact study of media attention and board independence on earnings management.From the perspective of the cost of information acquisition,it reveals the board independence and media attention to the interactive governance effects of these two internal and external governance mechanisms on the earnings management of listed companies.Chapter VI,Conclusions and Prospects.This chapter summarizes the conclusions and main innovations of this paper and looks into the future related research.The research results of this paper mainly include the following aspects:(1)The increase of media attention will make listed companies tend to choose accrual-based earnings management and effectively reduce the level of real earnings management.Non-state-owned companies use accrual-based earnings management more than state-owned companies,and the media is concerned about state-owned companies.The inhibition of real earnings management behavior is weak.In regions with high levels of media development,the news media's inhibitory effect on the accruals of listed companies and real earnings management behavior is more significant.Considering the two hypotheses of "effective supervision" and "market pressure",we examine the effect of media supervision and governance from the point of view of accruals and real two kinds of earnings management,as well as the differences in media governance effects between state-owned and non-state-owned companies.The study found that:First,a large amount of media attention put management faced with huge market pressures.Listed companies will,to a certain extent,adopt accrued project earnings management to "beautify the image",and at the same time prompt the company to pay more attention to external reputation and long-term interests.Effectively curb the actual earnings management behavior of listed companies.Second,after distinguishing the nature of property rights of listed companies,empirical results show that non-state-owned companies use accrual-based earnings management more than state-owned companies.Compared with non-state-owned companies,the media is concerned about state-owned companies.The inhibition of real earnings management behavior is weak;finally,the function of media supervision and governance will also be affected to some extent by the degree of media environment development in the region?and the areas with higher media development levels,news media accruals and realities for listed companies.The more significant the inhibitory effect of earnings management behavior is.(2)China's listed companies set up more independent director seats in the board to meet the statutory requirements of the supervisory level.Independent board ratio is used as the proxy variable of the board independence.It is found that the higher the independence of Chinese corporate boards,proxied by the percentage of independent directors,is associated with lower real earnings management.Based on the situation of China's capital market,the 2011-2016 data of A-share listed companies in China's Shanghai and Shenzhen stock markets were selected.Independent board ratio was used as the proxy variable of board independence to study the governance effect of board independence on earnings management of listed companies in China.The empirical results show that the board independence is negatively related to the listed company's accrual-based earnings management but not significant.It is significantly negatively related to the real earnings management of listed companies.It shows that the higher the independence of the board of directors,it has a significant governance effect on the real earnings management of listed companies,but there is no significant impact on the accrual-based earnings management.According to the descriptive statistics of the ratio of independent directors in the sample companies,50.55%of the sample companies have 33.33%of independent directors,which means that compared with the majority of seats held by independent directors in the capital markets of developed countries,the number of independent directors seated on the board of listed companies in China is more to cater for one-third of the statutory requirements of the supervisory level.The purpose of setting up independent director seats is not to improve the board independence and to improve corporate governance.Therefore,in the research on the background of China's capital market,there are certain research defects in the independent director ratio as the proxy variable of the board independence,and the empirical results obtained from this need to be further verified.(3)The use of "quasi-natural experiments" found that the resignation of official independent directors is significantly negatively related to the real earnings management of listed companies.This shows that the resignation of official independent directors is a benefit for small and medium shareholders and investors.Independent directors acted as "resource providers" in listed companies and did not perform the functions of independent directors to supervise and improve corporate governance.In order to alleviate the endogenous problems inherent in the research of independent directors,the 2011-2016 data of A-share listed companies in China's Shanghai and Shenzhen Stock Exchanges were selected,and the "Opinions" of the Central Organization Department were used to force the resignation of official independent directors as "quasi-natural experiments".The difference in difference model examines the influence of official independent directors on the earnings management of listed companies.The study found that the departure of official independent directors was significantly negatively related to the real earnings management of listed companies.This negative relationship shows that the departure of official independent directors is a benefit for small and medium shareholders and investors,indicating that official independent directors cannot play the role of supervision and governance in China's capital market.Required that the official independent directors forced resignation,may make the board of directors to join more independent directors with professional skills and professional experience,so as to enhance the overall supervision of the board.(4)Technical independent directors are significantly negatively correlated with real earnings management of listed companies,but they have no significant impact on accrual-based earnings management.Specialized independent directors who have practical experience can effectively reduce the real earnings management of listed companies but have no significant impact on accrual-based earnings management,and the scholar independent directors with a theoretical background have a significant inhibitory effect on accrual-based earnings management but have no significant impact on real earnings management.The use of a hybrid estimation model examines the impact of technical independent directors on the accruals of listed companies and on real earnings management and analyzes the differences in the impact of independent directors on earnings management in the substantive and theoretical sectors.The study finds that setting up technical independent directors is significantly negatively related to real earnings management of listed companies,but it has no significant effect on accrual-based earnings management;after distinguishing between specialized independent director and scholar independent directors,the higher the proportion of specialized independent director with backgrounds in finance and law practice,the lower the degree of real earnings management of listed companies;and the higher the proportion of scholar independent directors with the theoretical background of universities,research institutes,and industry associations,the lower the company's accrual-based earnings management level is.The study finds that specialized independent directors have better ability to identify real earnings management behaviors related to practice,such as sales manipulation and production manipulation.Therefore,they can effectively reduce the level of real earnings management,but there is no significant impact on accrual-based earnings management.In contrast,scholar independent directors do not recognize the real earnings management behavior based on actual production and business activities of the company,so they have no significant effect on real earnings management.However,scholar independent directors have solid theoretical foundation and professional knowledge and therefore have a good governance role in calculating the accrual-based earnings management.(5)From the perspective of information acquisition cost,it reveals the interaction governance effect of external governance mechanism(media)and internal governance mechanism(board independence)on the earnings management of listed companies in China and there is a complementary effect between the two.The board independence through the interaction with the external governance mechanism of the media will effectively suppress the earnings management of listed companies.This paper investigates board independence and media attention to the interactive governance effects of these two internal and external governance mechanisms on the earnings management of listed companies.The study finds that:For China's capital market,board independence and media attention these two internal and external governance mechanisms have a complementary relationship to the interactive governance effects of earnings management.Specifically,with increasing media attention,the degree of accrual and real earnings management of listed companies after the departure of official independent directors has dropped significantly;compared with non-technical independent directors,the higher the degree of media attention,the lower the degree of accruals and real earnings management of listed companies that set up technical independent directors;after further distinguishing specialized independent directors and scholar independent directors,we discovered that with the increase in media attention,specialized independent directors with financial and legal practice background and scholar independent directors with universities,research institutes,and industry associations will all have an inhibitory effect on the accruals and real earnings management of listed companies.The "scholar-type" independent directors in the theoretical background of the association will all have an inhibitory effect on the accruals and real earnings management of listed companies.It shows that after considering the influence factors of the external governance mechanism of the media,the corporate governance effect of the independence of the board of directors has been strengthened,which means that media attention and board independence have interaction effects on reducing earnings management.There is a complementary effect between the two.The independence of the board of directors through interaction with the external governance mechanism of the media will play a more important role in inhibiting the earnings management behavior of listed companies.