Political Connections、Financial Restatementsand Manager Turnover

In two rights separation of modern enterprise, the effective corporate governance mechanism by designing a good incentive and supervisory system of select capable manager for enterprise service. In recent years, executives of listed companies through financial restatements means to conceal poor performance in order to achieve personal self-interest or achieve the goal of shareholders expect more common. Effective corporate governance mechanism should be able to timely replace the unqualified managers, as the manager of an extreme constraints. Under the special background in China, between enterprise and government to build a political association will usually affect the behavior of the enterprise.The reputation incentive mechanism and organizational legitimacy theory of political association, financial restatement and executives relationship change between the three. Through theoretical analysis, financial restatements lead to a company’s reputation fell, organizational legitimacy loss, change of company is responsible for executives is to restore legitimacy reputation and repair of tissues. Because of China’s special background, there have all kinds of connections with the link between business and government, these political ties to change business responsible executives have little effect, this paper studies the effect of political association to restore legitimacy reputation and repair tissue. This paper also explores the nature of property rights under different political association, on the effect of the executive change is different.In this paper,2008-2010years of financial restatements A shares of listing Corporation and selected according to certain standards of matching companies for the study sample, using descriptive statistics, multiple regression method, empirical research on the relationship between the three. The study found:(1) in the control of other relevant factors, compared with the paired sample, the financial restatement of executives are more likely to change;(2) business executives with political backgrounds are weakening the impact of this change;(3) compared with state-owned enterprises, private enterprises executives political association weakening effect more obvious. The results show that, in Chinese capital market, in the face of financial restatement problems, governance mechanisms of listing Corporation is efficient, but the political connection weakens the effectiveness of governance mechanism, and this kind of weakening in the private enterprise is more obvious. This paper studies the environment in the corporate governance, the political connections into the research framework, the executive changes as the breakthrough point, on the financial restatement and economic consequences of political connection from the perspective of corporate governance efficiency make a new explain. The conclusion of this paper enriches the economic consequences of financial restatement literature, while expanding the research between top management and corporate governance.