A Study On The Influence Of Corporate Governance In Chinese Listed Companies On Earnings Management

Earnings management is behavior of corporate to increase or reduce the accounting earnings within the framework of generally accepted accounting principles, but this behavior which the manager made the adjustment to the financial data based on their own interests or the corporate value maximization. It is obviously contrary to the neutrality and fairness of the accounting information. In recent years, earnings management of listed company is growing, its means and form became more varied and covert. The phenomenon of earnings management led to a distortion of stock market information. It is not only reduces the efficiency of resource allocation, but also seriously affected the health and long-term development of China's capital market.This paper explored the connotation and the causes of earnings management, which were also two aspects as a breakthrough point of the paper. It discovered that, administered authority as the main body of the earnings management utilized the freedom of accounting policy to management the financial data when corporate governance mechanisms were inadequate. Therefore, to restrain the behavior of earnings management, it must solve the problem of imperfect corporate governance structure in the modern corporate system. This paper put forward seven hypotheses based on the theory of interaction between corporate structure and earnings management and the current situation of corporate structure as well as the resulting problems of earnings management. The paper chose1386A-share companies listed in Shanghai and Shenzhen Stock Exchange in2010as the research sample, and applied multiple linear regression to do empirical analysis of relations between earning management and corporate governance from four levels:ownership structure, the characteristics of board of directors, board of supervisors, and management's feature.Empirical Analysis of results showed that the percentage of share that the largest shareholder held has a U shape relationship with earnings management; the level of earnings management in the state-controlled listed companies is higher than in other equity nature of listed companies; the scale of board of directors and the proportion of independent directors is negatively related to earnings management; there is no significant correlation between earnings management and the frequency of board of supervisors'meetings, the share proportion of manager as well as the general manager and the board chairman is the same one.Therefore, in order to fundamentally restrict the listed company's behavior of earnings management, it must improve their corporate governance structure first. In the conclusion part of the paper, it put forward three suggestions to optimize the governance structure:optimize the equity structure, strengthening the role of board of directors, clear the board of supervisors'responsibilities, and sound internal incentive system.