The Agency-Principal Conflicts Based Research On Corporate Governance And Earnings Management Of Listed Companies

With the fast and constant development of China economy and the completion of the Nontradable Shares Reform in Chinese listed companies, China capital market receives an important period of development opportunity and listed companies have been becoming the group which holds the best development advantages in the economic operations of China. But, under the new market conditions that all shares of listed companies can be traded, the motivations and forms of listed companies' earnings management have been became more complex, and the investors also need the listed companies report high-quality accounting information. How to maintain the fairness of the market and actually protect the legal interests of small and median investors has become the most severe challenge facing the development of China capital market. As the same time that the government completes laws and regulations to warden the financial reports of listed companies, how to promote the listed companies effectively constrain earnings management and improve the transparency of accounting information through completing corporate governance structure from the angel of maximizing the interests of whole shareholders has become the ground to maintain the constant and healthy development of China capital market. Under the conditions, the empirical study conducted by the dissertation on the agent-principal conflicts, corporate governance and earnings management holds important theoretical and realistic significances.The whole study of the dissertation includes seven chapters. The first chapter is the introduction and introduces the background and scientific significance of the study choice, the progress of related studies, the contents, research methods and technical route of the study. The second chapter conducts an cluster analysis on the agent-principal conflicts existing in the listed companies by using TwoStep Cluster method. The third chapter comprehensively evaluates the corporate governance mechanics of listed companies by using Factor Analysis method. The forth chapter measurers the extent of earnings management of listed companies by using the cross-sectional adaptation of the modified Jones model. The fifth chapter conducts empirical examination on the relationship between corporate governance and earnings management. The sixth chapter studies the constraint of earnings management. The seventh chapter is the conclusion and future research prospect. The mainly research findings of the dissertation are shown as follows: 1 The research conducts effectively cluster analysis on research samples based on the potential agency-princial conflicts.The dissertation chooses listed companies in Shanghai and Shenzhen during the period through 2004 to 2006 as research samples, sets research variables to reflect the degree of potential agency-princial conflicts, and uses two-step cluster analysis method to classify the research samples into two groups. Based on the result of analysis, the dissertation uses independent sample t test method to testify there are significant differences on the means of research variables between the sample groups, and the levels of firm size, debt, business risk and earnings capacity in the high agency-principal conflicts sample group are all higher than the low agency-principal conflicts sample group.2 The research testifies the arrangement of corporate govenace mechanism and earnings management are all related to the agency-principal conflicts.The dissertaton sets research variables of corporate governance from five aspects, including ownership structure, board of directors, board of supervisors, the incentive mechanism of top executives and the transparency of financial information, uses factor analysis method to evaluate the perfection of corporate governance; and the dissertation uses the cross-sectional adaptation of the modified Jones model to calculate the earnings management. Then, the dissertation uses the independent samples t test method to analyze the means differences of the corporate governance evaluating results and the earngings management, and proves that the corporate governace mechanism of high agency-principal conflicts samples is more perfect than that of low agency-principal conflicts samples and the degree of earnging management of high agency-principal conflicts samples is lower than that of low agency-principal conflicts samples.3 The dissertation proves that there is an interrelationship between the agency conflicts, corporate governance and earning management.From ownership structure, board of directors, board of supervisors, and the incentives of top executives, the dissertation sets research variables as the proxies of corporate governance, and establishes multiregression model to conduct the empirical examinations on the relationship between corporate governance and earnings management. The dissertation proves that the corporate governance mechanisms holds effeicient constraints on earnings management in high agency-principal conflicts samples, but the corporate governance mechanisms hold little constraints on earnings management in low agency-principal conflicts samples.4 Confirm effective constraint mechanisms of earnings management, explain the functions and interrelationship of the constraint mechanisms, establish earnings management constraint efficiency evaluation model. The dissertation uses comprehensive statistic methods to extract constraint mechanisms from the angle of effectively constraining earnings management, and conducts empirical examinations and evaluation on the efficiency of each constraint mechanisms. On the basis, through the theoretical analysis, the dissertation explains the function and interrelationship of the constrain mechanisms and establish the comprehensive evaluation model on the constraint efficiency of earnings management; through empirical examination the dissertation testifies the effectiveness of the model and the evaluating results obtained by using the model.