Study On The Impact Of Interlocking Directorates On The Accounting Policy Choice

In the listed companies in China, interlocking directorates that represent the boardrelationship properties is very common.The relationship has very big effect.onenterprise behavior and other relations between enterprises.A lot of existing literature is researched from the nature of the board of directors,namely, stakeholders (including the board of directors characteristics), to study theinfluence on accounting policy choice. That the board relation properties (such asinterlocking directorates) on accounting policy choices attracts less attention.In this paper, using social network analysis method to study the effect ofinterlocking directorates on accounting policy choice, try to answer the followingquestions: whether through of the two companies existing interlocking directoratescoupling show consistency in terms of accounting policy choice? Whether there are anydifferences in terms of accounting policy choice between Internal coupling directorswith external directors? Whether there are any differences in terms of accounting policychoice between direct directors with indirect directors?Based on the study of the scholars at home and abroad, this paper explain thetheory that interlocking directorates on accounting policy choice from the perpestive ofGranovetter’s social network connection strength theory and the weak tie theory.Thenthe key concept and extension concerned in the paper is analysised and defined.Using normative research method, we study the theories such as interlockingdirectorates network, internal and external directors link chain, chain director couplingdistance which may have an impact on accounting policy selection, and then empiricalresearch is needed to verify the hypothesis.In the process of empirical research, the paper selects Interlockingdirectoratescoupling between132listed companies in Northeast China in2012.We selectccounting policy choice to be explained variable,select Interlocking directoratescoupling, internal and external director coupling, director of indirect coupling anddirector directly coupling as the explanatory variable, select regional characteristics ascontrol variables, on the basis of the assumption, build regression model and using themethod of randomization test method (QAP) test how the various factors have an effecton an accounting policy choice. Study shows that companies are affected by enterprisecouped when they select accounting policy accounting policy choice; The companiescoupled by the internal directors don’t show the consistency (take valuation ofinventoryand accounts receivable provision for bad debts for example). The companiescoupled by the external directors show the consistency (take valuation of inventoryandaccounts receivable provision for bad debts for example). The companies coupled bythe outside directors show the consistency (take valuation of inventoryand accounts receivable provision for bad debts for example), but it’s impact weaklier than the directconnection.In this paper make a suggestion that how to prevent chain director "infidelity"behavior, and how to make good use of interlocking directorates, on the basis of theempirical research.