Study On The Relationship Of CFO Background Characteristics,CEO Power And Accounting Conservatism

Conservatism is an important principle that accounting earnings confirms and measures in China.With the development of China's capital market,the external users of the statements have the demand on improving accounting information quality gradually.However,there is still the occurrence of seriously financial frauds like Enron,WorldCom and others.The sarbanes-oxley act require all the CEO and CFO of listed companies to sign the financial statements,in order to ensure the authenticity of the report,which means that the CFO assume more risk and responsibility.Whereas the CFO was regarded as the CEO's agent,so the public have less attention on it.Today in China,the CFO system is the mechanism of corporate governance that the listed companies are actively perfecting.Most of the foreign and domestic scholars in empirical studies have proved that the CFO play an important role in the formulation and implementation of the accounting policy,its behavior preference directly affect the choice of accounting policy and accounting conservatism.An impressive body of literature indicate that the CEO can significantly affect the action of the CFO,namely the CEO's power is greater than the CFO significantly.More specifically,the CEO has significant effects on the CFO's changes,promotion,salary incentive and job.Therefore,this paper attempts to explore the influence of CFO background characteristics on accounting conservatism and the relationship between them is mediated by CEO power.This paper research on CFO background characteristics,CEO power and accounting conservatism based on Upper Echelon Theory,Agency Theory and Management Power Theory,with the samples of listed companies of A share from 2012 to 2016.The results show that professional ability,age and female are the three CFO's features promoting the accounting conservatism.However the CFO's term and CEO power have a greater negative impact on it.The adjustment of CEO power to the correlation between CFO background characteristics and accounting conservatism is analyzed too.The study found that CEO power reinforce the negative impact of CFO term on accounting conservatism,simultaneously it promotes the positive effect of CFO age on accounting conservatism and prevents the positive influence of female CFO.However,there is no moderate effect on the relationship between CFO professional ability and accounting conservatism.The cause might be the positive influence of CFO professional ability on accounting conservatism is relatively independent from CEO power.The research enriches the theory of Upper Echelon,and documents in accounting conservatism field.At the same time,the study will be very meaningful to improve accounting information level,and decision-making in appointing CFO or CEO.