Executives Centralization, Internal Control Quality And Accounting Conservatism

A series of financial fraud cases happened at the beginning of the 21 st century in the United States, which prompted the US government to strengthen information disclosure of internal control mechanisms. Internal controls can achieve internal self-regulation and self-restraint for enterprises, and enterprises can be effectively implemented and can provide true and reliable financial information for stakeholders if a sound internal control system can be established. The conservatism of financial information as an essential criterion for accounting recognition, can effectively solve the agency conflict because of the inaccurate generated data. Under the high quality internal control system, enterprises revealed true and reliable financial information, which may improves accounting conservatism. Our company should learn from the American experience, moreover, our country advocated power since ancient times, personal qualities and owned power of corporate executives will affect business decision-making and implementation of internal control effectiveness. Thus, when the internal control enhances accounting conservatism, executives centralization will affect this enhancement.This paper collects 2012-2014 financial data of Main Board companies from Shanghai and Shenzhen stock exchange, uses Dibo internal index to determine the level of internal control quality, selects stock surplus compensation model proposed by Basu to measure accounting conservatism, chooses the size of the company, financial risk, growth ability as control variables, firstly explores whether the conservatism is the basic security and robust features of accounting earnings, then explores the enhancement of the quality of internal control for accounting conservatism, and finally using chairman and CEO duality to define executives centralization, to analyze executives centralization impact on the quality of internal control and accounting conservatism relationsAfter empirical study we find that:(1) In the study sample, 80.50% of the listed company internal control index at a high level, but a small number companies of quality of internal control at a low level.(2) Conservatism is the security and robustness features of accounting earnings.(3) The high quality of internal control enhances the performance of accounting conservatism.(4) Executives centralization will inhibit the internal control to enhance accounting conservatism, and in executive decentralized state, the role of the internal control quality to enhance accounting conservatism can be effectively realized.This paper systematically studies the relationship between corporate executives centralization, internal control quality and accounting conservatism. In the theoretical value, compared to the research of other scholars, the paper adds executive power structure as a third variable, provides a reference for corporate power configuration structure and policies development; On the practical value, the paper regulates the disclosure of internal control the information from the perspective of accounting information quality, helps really play the role of governance mechanisms of internal corporate to ensure the reliability of financial information.