"Communist Party Member" Status Of College Background Independent Directors And Corporate Earning Management

In 2001,the China Securities Regulatory Commission(CSRC)issued the "Guiding Opinions on Establishing Independent Systems in Listed Companies",which has stipulated the listed companies should establish an independent director system.The original intention of establishing the independent director system is to improve the corporate governance structure,and to promote the standardized operation of listed companies through independent directors’ supervision on large shareholders and managers,thereby protecting the rights and interests of small and medium shareholders.Since the introduction of the independent director system in China,whether the independent directors have reduced the company’s earnings management level has been a topic of concern in academia and practice,and is also a manifestation of independent directors’ supervisory function.The existing literatures mainly choose the independent director’s percentage,major,professional background,reputation and other characteristics as the starting point in their studies,and then examine the impact of independent directors on the company’s earnings management.Few literatures have studied the relationship between the heterogeneity of independent directors with the same professional background and the company’s earnings management.Unlike independent directors with other professional backgrounds,independent directors with college background are a group with strong professionalism and independence,but behind their ability to effectively perform their duties,the role of culture cannot be ignored.As a socialist country governed by the Communist Party,communist culture is the main content of the political culture with Chinese characteristics,not only has great significance to the social and economic development of our country at the macro level,but also penetrates into the thoughts and actions of the Communist Party members,realizing the conversion from abstract to concrete on the individual.According to upper echelons theory,the status of "Communist Party Member" is an objective indicator that can be observed and obtained,so the status can be included in the college background independent director’s characteristic index system.,which make it practical to explore the impact of Chinese political culture on corporate earnings management behavior at individual level.For college background independent directors with "Communist Party Member" status,the communist culture has subtly participated in their decision-making process on the board,by influencing their thinking mode and value concept,and which finally has an impact on the company’s earnings management.Based on the perspective of political culture with Chinese characteristics,this paper selects the relevant data of 2013-2018 A-share listed companies in China that have hired at least an independent director with college background as the research sample,and studies the impact of the "Communist Party Member" status of college background independent directors on the company’s earnings management,and meanwhile investigates whether the different property rights of the company affect the relationship between the "Communist Party Member" status and the company’s earnings management.The empirical results show that:(1)Compared with other companies,the level of earnings management in the companies those have owned college background independent directors with "Communist Party Member" status is lower;(2)Compared with non-state-owned enterprises,college background independent directors with "Communist Party Member" status can more significantly reduce the level of earnings management of state-owned enterprises.Further,this paper finds that college background independent directors with the "Communist Party Member" status can play a more significant role in inhibiting the company’s upward earnings management behavior,and also can play a positive role in lowering the company’s earnings management level compared to those with "Democratic Party" status.The above conclusion shows,as a group of cultural carriers of Chinese communism,the college background independent directors with "Communist Party members" status can play a role of the pioneer model in supervising and reducing the companies’ earnings management activities.