Study On The Relevance Of Board Characteristics And Earnings Management Behavior

In accounting and financial areas earnings management of listed companies has always been focused. How to control earnings management has aroused the domestic and foreign academic enormously attention. At present, the exiting theoretical and empirical studies on controlling earnings management behavior mainly revolve around investor-protecting law, accounting regulation and corporate governance. The board of director is the most important part in corporate governance. Unbalanced corporate governance mechanism is an important reason causing earnings management. The thesis will analyze the board of directors'control affect on earnings management behavior in the board view.The thesis, on the base of reviewing the theory of earnings management and board of director and the empirical studies on the relationship between them, theoretically analyzes their connection in principle theory, asymmetry information theory and property perspective respectively. In the principle theory perspective board of directors have the rights and responsibilities to control earnings management behavior, in asymmetry information perspective board have the feasible condition in controlling earnings management and in property perspective perfecting board will be effective in reducing earnings management. It also takes listed companies from the year of 2003 to 2005 up to 3515 units'data as the samples to empirically analyzes the relationship between board characteristics and earnings management. The research result show: in China's listed company, the board scale is reasonable; the independence of the board is positive to control earnings management; how many suggestions the independent directors proposed have no relationship with earnings management, but when these suggestions are not agreeable they would be effective; board's shares-holding ratio is so low that it has no relationship with earnings management, either do the board's salary characteristics; the directors with accounting knowledge background are effective in controlling earnings management. Based on these empirical results, this thesis suggests: increasing the independency of board; independent directors are effective but there are some problems in their proposing suggestions; incentive system should be perfect in both share-holding policy and salary contract; there should be more directors who have the accounting knowledge background. At last, controlling earnings management not only needs perfection the board of directors but also improvement of corporate governance itself and the environments of cooperate governance.