Research On The Impact Of Independent Directors’ Performance On Listed Companies’ Financial Restatement

In 2019,Kangmei Pharmaceutical announced the restatement of over 29.944 billion yuan of monetary funds in 2017,which caused a sensation in the whole country.At the same time,the court ruled that the five independent directors should bear joint and several liabilities,which once again made the independent directors the focus of discussion in the theoretical and practical circles.The occurrence of financial restatement means that the accounting information is not true and reliable,which not only damages the reputation established by the listed companies,but also causes investors to lose confidence and has a negative impact on the capital market.Is the phenomenon of financial explosion of listed companies an example or a common phenomenon? Is the independent director system formalistic or effective? This is a difficult point and a key point that needs to be further explored and solved.Based on principal-agent theory,information asymmetry theory,stakeholder theory and reputation theory,this paper selects 17,534 samples of listed companies in Shanghai and Shenzhen A-share markets from 2014 to 2020,takes independent directors’ performance as the explanatory variable and financial restatement as the explanatory variable,empirically studies the impact of independent directors’ performance on financial restatement,and on this basis tests the mediating effect between internal control and auditor selection by constructing a mediating effect model.The findings are as follows:(1)Independent directors’ performance is negatively correlated with financial restatement of listed companies.That is,the more effective the independent directors are in performing their duties,the lower the probability of financial restatement of listed companies.(2)Internal control and auditor selection play an intermediary role in the process of independent directors’ performance affecting listed companies’ financial restatements.That is,the higher the effectiveness of independent directors in performing their duties,the better the internal control quality of the enterprise will be.The more inclined the audit of annual report of the enterprise will be to select high-quality auditors,so as to avoid the speculative behavior of managers and inhibit the financial restatement of the enterprise.(3)Heterogeneity analysis shows that independent directors’ performance is negatively correlated with listed companies’ financial restatements based on different degree of marketization and ownership concentration.However,the mediating role of internal control and auditor selection is only significant for listed companies located in low market-oriented areas and low equity concentration,but not significant for listed companies located in high market-oriented areas and high equity concentration.This paper provides strong evidence to study the impact of independent director system on listed companies’ financial restatement behavior.First of all,a small amount of research on the relationship between independent directors and financial restatement has been carried out mainly from the perspective of the proportion and characteristics of independent directors.This paper interprets the behavior of independent directors affecting corporate financial restatement from the perspective of performance motivation,and expands the research on the related fields of independent directors and financial restatement.Secondly,the existing research seldom studies the relationship between independent directors and financial restatement by combining internal and external governance,and this paper reveals that internal control and auditor selection are the mechanism of independent directors’ performance affecting financial restatement,which provides a new idea for improving corporate governance from the inside out.