Research On The Relationship Of Financial Restatement And Characteristics Of The Board

Financial restatement is the listed company which is voluntarily or urged by the behavior to amend or supplement the financial report. Because the financial report has error, illegal or some misleading information. The public pay attention to financial restatement because it represents the information disclosure of public company is not all-around and has some drawbacks. Especially when the financial restatement involved in the Retrospective restatement method, the profit of the company needs to be changed correspondingly. The users of the financial report may be misled and have done some mistake. This is serious.Domestic and foreign scholars study various researches on financial restatement, such as the motivation of financial restatements and the consequences of the financial restatement. There are many reasons caused financial restatements, the surface reason may be earnings management, but the fundamental reason may be the lack of corporate governance. Board of Directors is the regulatory institution of the listed company, and is responsible for the financial statements of listed companies, at the same time, one main factor of the corporate governance is the board of directors. This study aims to discover the relationship between the financial restatement and the characteristics of the board.And make some suggestions for the improvement of corporate governance.This paper attempts to use the empirical study to find whether there is any relationships between the the board of directors and the financial restatement.The author choose six characteristics to represent the board of directors:board size, proportion of the independent directors, the separation of ownership and the frequency of the board meeting, the establish of special committees the Board holding stocks.Firstly, on the basis of financial restatements and the related theory of the board characteristics, this article made the assumption from six areas of the board characteristics hypothesis,. Then the author collected the listed company which has financial restatement situation between2008-2010annual financial reports. Then establish the logistic model in accordance with the relevant data to do the regression analysis. The empirical results show that board size and proportion of independent directors have not passed significant test, and they are not significantly correlated with the phenomenon of financial restatement. But the financial restatement are positively correlated with the separation of ownership and the number of board meetings, the establishment of special committees and the Board holding stocks are negatively correlated with the financial restatement. Ultimately, aim to the relationship between board characteristics and financial restatement,the author make some suggestions on how to improve the board of directors and reduce the financial restatement.