Study On The Independent Directors And Earnings Management Of Private Listed Companies

Nearly years, the private sector grew rapidly in China. It becomes an important part of socialist market economy. However, as its rapid growth, lots of problems about corporate governance protrude; this would hinder the healthy growth of the private sector. The defect of listed companies' corporate governance structure provides many chances and space for earnings management. But, at present, independent directors don't play role in the corporate governance structure, there are large amount of behavior of breaking the law or violating regulation in the listed companies, earnings management are also common existence. Thus, it is of great significance and necessity to have in-depth study on this topic.First this paper analyzes existing researches and relative basic theories, then tries to reveal the relationship between independent directors and earnings management on the base of existing theories and positive research. This paper mainly bases on the data of part of private listed companies from 2007 to 2009 to investigate the influence on earnings management---based on the proportion of independent directors,the proportion of independent directors with a background in accounting and financial professionals,the average wages of independent directors,the numbers of independent directors to attend the board meetings,the change of independent directors.We draw following conclusions:the more proportion of independent directors, the more proportion of independent directors with a background in accounting and financial professionals, the higher average wages of independent directors, the more numbers of independent directors to attend the board meetings, the better earning quality will be.The higher probability and ratio of the change of independent directors, the higher level of company's earnings management. Additionally, empirical results show that independent directors'features of private listed companies is of asymmetry on the supervision direction of earnings management.Because independent directors don't fully play the role in private listed companies,on the base of empirical results, we put forward a number of recommendations to play the role of independent directors of private listed companies:Cultivate the talent market of independent directors and establish the self-regulatory organizations of independent director; Increase the proportion of independent directors of private listed companies; Increase the proportion of independent directors with a background in accounting and financial professionals of private listed companies; Strengthen the independence of independent directors; Improve the incentive and restrictive mechanism of independent directors; Build the culture of independent directors.