Research On The Influence Of Technology Independent Directors To Real Earnings Management

Earnings management is one of the focuses of the current accounting researches. Most of the previous studies focused on the accruals management, but recent years, the space that managers through the traditional accounting methods of earnings management are greatly compressed, they are more inclined to control real activities. Many foreign scholars have found that the manipulation of R&D spending is one of the main means of real earnings management. For their own interests, managers sometimes don’t want to spend much money on R&D activities. Such manipulation of R&D spending will not only make the company deviate from the best R & D decisions, but also seriously damage the future value of the company.So, how to effectively identify the management of R&D spending and constrain the occurrence o f real earnings management are the focus of investors, creditors and other stakeholders concerned. This paper derives from the perspective of research and development(R&D) spending manipulation and analyzes the role of technology independent directors in constraining real earnings management. Using all C hinese companies listed on the stock exchanges during 2007-2013, we find that the technology independent directors have sufficient technical knowledge to identify opportunistic reductions in R&D, and efficiently constrain real earnings management. We also document that if technology independent directors reduce the number of part-time job and employ technology independent directors who with multi-background, it is benefit for them to play supervisory role. However, the compensation level of technology independent directors is not found to have incentive effects on constraining real earnings management. The findings of this paper have significant implications for C hinese government and firms in the constructio n of independent director system as well as the improvement of accounting earnings information quality. This study also offers insights to policy makers interested in enhancing the monitoring role of corporate boards.