The Empirical Research On The Relationship Between Listed Companies’ Financial Restatement And Top Management Turnover

Financial statement is the essential path for the listed companies to disclose the financial information, and is also the source for the investors to get the companies’financial information, which gains the attention of the academic circle and the supervisory authority for a long time. In recent years, the incidence of Chinese listed companies’material accounting errors and financial fraud is more and more high, followed by this, the incidence of financial restatement is gradually increasing. While, preparing and disclosing the accounting information has the direct and indirect economic consequences, therefore, the listed companies may suffer the negative influence from the financial restatement. This paper focuses on the issue of financial restatement, and the listed companies whether or not take the effective and efficient measure to respond, and even, they whether or not can change or fire their relevant top-executive. In addition, this paper verify the listed companies’internal governance mechanism whether work sound and repair the reputation the companies losing for the financial restatement or not.This paper’s structure mainly concludes the following aspects:the first part is the introduction, recommending the background and meaning of selecting this subject, defining the relevant conceptions, stating the fundamental research method and structure arrangement, and pressing the possible innovations. The second part is the literature review, reviewing the related domestic and overseas literatures, summarizing the existing literatures’different angles of financial restatement. The third part is the theoretical analysis, by anglicizing the Principal-agent Theory, the Asymmetric Information Theory, and the relevant theories of corporate government, preparing the theoretical support for the following study of the relationship between turnover of top executive and financial restatement. The fourth part and the fifth part is the empirical test, respectively, the study design and the empirical analysis, with the671companies publishing financial restatements during2007-2010as the research sample, selecting the671companies as the control sample according industry and enterprise scale, and testing financial restatement and relevant elements of corporate government how to affect turnover of top executive. The last part is the summary, concluding the empirical test, proposing policies and suggestions, and presenting the deficiencies.From the conclusion of the theoretical analysis and the empirical analysis, the listed companies with financial restatement are more likely to suffer the turnover of top executives, than the companies without financial restatement. Further more, within the listed companies restating their financial statement, state-owned enterprises have the lower incidence of turnover of top management than non-state enterprises. In addition, the restate-companies with the combination of chairman of the board and general manager gain the lower incidence of turnover of top management than those chairmen of the board and general managers with different individuals. Finally, the restate-companies with large proportion of independent director own the higher incidence of turnover of top management than those with small proportion.This paper mainly lies in the innovation is how to ensure the size of top management’s turnover sample. The time range is between the half year before the date of financial restatement and the one year after that date, which differs form other literature focusing on the two or three years after the date of financial restatement. With the consideration of the half year before the date, listed companies’pre-treatment can be contained. Meanwhile, shortening the following time after the date from two or three years to one year is because the influence of restatement may not that heavy, ignore the individual sample, and concentrate on the observation of top management turnover.