Characteristics Of Independent Directors,Earnings Management And Enterprise Value

Independent directors may remain independent of the CEO nominally,But they can form social contacts with the CEO through the same professional background,educational background,professional experience or overseas background.Although these social networks are not linked to traditional measures of independence,a large number of studies suggest that these linkages may influence economic outcomes.However,do these ties constrain or promote opportunistic behavior?bring positive or negative impact?On the one hand,when an independent director has same career or overseas background with CEO,he or she may be more likely to judge CEO’s behavior from the vantage point,and to reduce the supervision of CEO,which may lead to opportunistic behavior of CEO.On the other hand,the same professional and education background can reduce the cost of communication between the CEO and the independent director,strengthen cooperation,leading CEO to stop opportunism behavior.This paper studies the influence of individual and linked characteristics of independent directors on enterprise value.The individual characteristics of independent directors mainly include gender,age,salary,proportion of directors and number of service companies.The linked characteristics constructs the independent directors-CEO characteristic connection and examines the impact of independent directors’ governance mechanism on the degree of corporate earnings management and the value of enterprises.This article takes A-share listed companies from 2007 to 2016 as the sample,based on principal-agent theory,similar theory and social network theory,establish empirical analysis models to test the characteristics of independent directors on corporate earnings management and corporate value.Then it provide some suggestions to improve the management of the board and enhance the value of enterprises.This research finds:(1)Independent directors’ age,salary and proportion have significant positive relationship with enterprise value,but the number of part-time directors of independent directors is opposite.(2)The proportion of independent directors has a positive impact on earnings management of listed companies,while independent directors’ compensation is opposite.(3)The independent directors-CEO characteristic connection lead to changes in earnings management,and it have no significant impact on corporate value.(4)The independent directors-CEO characteristic connection has significant positive impact on enterprise value.(5)The independent directors with characteristic links will default to the enterprise earnings management and enhance the enterprise value.However,with the increase of the degree of earnings management,the supervision of the independent directors for the management of surplus activities has also increased.