Research On The Impact Of Internal Control On Earnings Management Behavior Of Listed Companies

Since the 21st century,a series of financial frauds and the bankruptcy cases of listed companies around the world have made all sectors of society pay special attention to the quality of internal control of enterprises.China has also issued a series of relevant laws and regulations to improve the Internal Control System.Among them,to ensure the authenticity of accounting information quality is always a basic goal of internal control,and most studies regard the degree of accrual earnings management as an important indicator to measure the quality of accounting information,many scholars also pay attention to the impact of internal control on earnings management of listed companies.In the early stage,the use of earnings management is more accrual earnings management,and in the later stage,it began to pay attention to the real activities of earnings management.The implementation of internal control standard system has changed the relative cost of accrual and real activity earnings management of listed companies to a certain extent.This paper will study the different effects of internal control on accrual and real activity earnings management.Some studies have found that the professional level and judgment of senior executives are very important for the construction of internal control.This paper selects the CEO financial experience in the characteristics of senior executives to study its impact on the relationship between internal control and earnings management.Based on this,this paper starts from CEO's financial experience,and analyzes the regulatory role between internal control and accrual and real activity earnings management.In this paper,A-share main board listed companies in China from 2012 to 2017 are selected as samples,and regression analysis is carried out based on the construction of multiple linear regression model.The empirical results show that:(1)internal control has a significant negative correlation with the controllable accruals,and a significant positive correlation with the real earnings management,indicating that high-quality internal control can reduce the degree of the accrual earnings management,but will increase the degree of the real activity manipulation;(2)join the CEO's financial experience as a moderating variable to group test,and find that the CEO has the financial experience of the company's internal control.There is a significant negative correlation between the system and the accrual earnings management.The internal control and the accrual earnings management of the company with no financial experience of CEO are not significant,which verifies that compared with the company with no financial experience of CEO,the high-quality internal control of the company with financial experience of CEO reduces the degree of the accrual earnings management to a greater extent;for the real earnings management,the internal control and the real activity earnings management of the company with or without financial experience of CEO are significant.There is a positive correlation,but the regression coefficient of the company with CEO financial experience is smaller,which shows that compared with the company without CEO financial experience,the degree of real activity earnings management increased by high-quality internal control in the company with CEO financial experience is smaller;(3)further decomposition analysis of the corresponding and real activity earnings management,the research found that the main reason is to inhibit the negative accrual earnings management,and the positive accrual earnings management.Earnings management does not play a significant role in reducing the company's tendency of cost manipulation in a strict internal control environment.The conclusions of this paper have important implications for government departments and corporate management:first,this paper has some reference significance for enterprises to formulate the criteria of selecting managers.Managers'previous experience has an important impact on their decision-making ability and judgment,so it can be used as one of the selection indicators.Financial knowledge plays a more and more important role in enterprise management.Only by accurately interpreting accounting information can decision-makers ensure the coordination of business activities and the efficiency and effect of operation.Especially the CEO has financial experience,mastering financial knowledge to analyze the financial operation of the enterprise is conducive to improving the overall economic benefits and enterprise value;secondly,the research conclusion can make the regulatory authorities and auditors better understand the impact of internal control on earnings management behavior.This paper finds that internal control can effectively inhibit the accrual earnings management,but promote the real earnings management behavior;further study the relationship between CEO's financial experience and the accrual and real activity earnings management behavior of listed companies,and find that CEO's financial experience can effectively enhance the inhibitory effect of internal control on the accrual earnings management,and weaken the internal control.The promotion effect of ministry control on earnings management of real activities.Regulators and external auditors focus on the real earnings management behavior,so that they can further strengthen the supervision of earnings manipulation of listed companies.The innovation of this paper lies in:(1)this paper makes a further study on the impact of internal control on earnings management of real activities.Although there is a literature study on the relationship between internal control and earnings management in the past,it is usually based on accrual earnings management.In this paper,earnings management is divided into accrual earnings management and real activity earnings management.It is found that high-quality internal control has the opposite effect on accrual earnings management and real activity earnings management;(2)this study introduces CEO finance.Through this new perspective,this paper analyzes the relationship between internal control and earnings management.Most scholars discuss the relationship between executive characteristics and internal control and earnings management in a single form;some scholars study the relationship between internal control and earnings management from the perspective of external stakeholders and executive power concentration,but pay little attention to the role of CEO's financial experience and other characteristics of executives in it.This paper takes CEO's financial experience as a new perspective.To explore its impact on the relationship between internal control and earnings management.