Executive Team Audit Background,Power Distribution And Enterprise Violation

In recent years,there has been a phenomenon of "rising of high-level executives with auditing backgrounds" in the management teams of listed companies in China.According to statistics,the proportion of high-level executives with auditing backgrounds in the management teams of listed companies in China was about 49.12%between 2010 and 2021.At the same time,there has been an increase in corporate violations in recent years,which has seriously affected the healthy development of China’s capital market.Therefore,the factors influencing corporate violations have also received significant attention.As the management team jointly makes corporate decision-making,the greater the power of high-level executives,the more likely their decisions will become the final decisions of the company.Against the background of the rise of high-level executives with auditing backgrounds,it is of great theoretical and practical significance to explore the impact of high-level executives’ auditing backgrounds and power distribution on corporate violations.Based on the theories of top management team and stigma,this study uses all Ashare listed companies in China from 2010 to 2021 as research samples to empirically test the relationship between the auditing backgrounds of management teams and corporate violations.The study also uses the latest power measurement methods and collected data on rankings of top executives in corporate annual reports to examine the moderating effect of high-level executives’ power on this relationship.Furthermore,this study conducts further analysis on the relationship between high-level executives’ auditing backgrounds and corporate violations based on differences in executive roles,property rights nature,audit firm size,and types of corporate violations.To ensure the reliability of the results,this study conducts robustness tests using methods such as changing measurement indicators,lagging the dependent variable by one period,propensity score matching,and instrumental variable approach.The research findings reveal that the auditing backgrounds of management teams significantly increase corporate violations,and the greater the power of high-level executives with auditing backgrounds,the greater the tendency for corporate violations.Specifically,when companies have high-level executives with auditing backgrounds and a larger number of high-level executives with auditing backgrounds in the management team,the likelihood and frequency of corporate violations significantly increase.High-level executives’ power is a moderating variable in this relationship,and the greater the power of high-level executives with auditing backgrounds in the entire management team,the greater the tendency for corporate violations.This conclusion still holds after conducting multiple robustness tests.Further research indicates that compared to "decision-making" high-level executives,high-level executives with auditing backgrounds who have greater power have a more significant impact on corporate violations.The impact of high-level executives’ auditing backgrounds and power on corporate violations is more significant in state-owned enterprises and enterprises audited by large-scale audit firms compared to non-state-owned enterprises and enterprises audited by small-scale audit firms.In addition,the impact of high-level executives’ auditing backgrounds on accounting violations is more significant compared to non-accounting violations,but there is no significant difference in the impact of high-level executives’ power on accounting and non-accounting violations.Different from previous literature that explores the factors influencing corporate violations from the perspectives of high-level executives’ political,overseas,or academic backgrounds,this study,based on the perspective of high-level executives’ auditing backgrounds,investigates the relationship between the auditing backgrounds of management teams and corporate violations under different power distribution contexts.This not only enriches the literature on factors influencing corporate violations,but also contributes to the research on the economic consequences of high-level executives’ auditing backgrounds.In practice,this study provides references for optimizing the management structure of listed companies based on the heterogeneity of high-level executives’ team backgrounds,evaluating the economic consequences of high-level executives’ auditing backgrounds for investors,and strengthening targeted supervision of corporate violations,enhancing the supervision of high-level executives’ auditing,and improving the governance level of management teams by government departments.