A Study On The Impacts Of Material Power Over Financial Restatement Under Different Ownership Nature

The frequency of financial restatements in listed companies has brought aboutimmeasurable losses to the majority of investors, making investors doubt about thecredit of companies and their CEO. The public’s confidence to the capital market isdealt a severe blow. Financial restatement means there are errors in the previousfinancial report and it is urgent to improve the quality of accounting inf ormation. Asthe listed company’s highest decision-maker, CEO has the right to affect accountingdecisions to a large extent, thus exerting influence on the generation and disclosure ofaccounting information. Various sources of managerial power have different influenceon CEO’s behavior, and it is diverse under different ownership nature. Therefore, doinga research on how various sources of managerial power plays a role in restatement, andhow different ownership nature affect this role, would do good to our corporationefficiency and their accounting information quality.Based on the previous literature review and realistic background, we use CEO’sduality, stock ownership and term to measure their structural power, ownership power,and prestige power. We collect the listed company in Chinese A stock market havingmisreporting issues from2003to2010, by checking significant accounting error issuesin their financial report from2003to2012. According to the standard of the same year,the same industry, the same listing exchange and having no misreporting issue, we findpaired samples. Finally, we collect1249misreporting samples and1249un-misreporting samples. Through Logit regression analysis, we investigate how varioussources of managerial power influence restatement, and how ownership nature makecontribute to the effect. Our study shows that there is a positive correlation betweenCEO’s duality and restatement, and CEO’s duality have weaker correlation withrestatement in the state-owned firm. There is a negative correlation between stockownership and restatement. And it plays a more effective role in the state-owned firmto improve the accuracy of accounting information. CEO’s term also exhibits negativeeffects on restatement, but not prominently. At last, our article comes up with severalpolices and suggestions at corporation, market and nation level.