Study On The Effect Of Corporate Governance On Earnings Management

China stock market is shifting more toward good health day by day, however, earnings management phenomena which exits in the listed companies still gets much attention from many kinds of people in our society. Most domestic scholars focused their research on the fields,"whether"and"when"the earnings management phenomenon has occurred. The uniqueness of this paper versus other papers relating earnings management is that it tries to conduct the analyses while combing earning management and corporate governance in order to verify that the characteristics of corporate governance are the intrinsic causation of earning management.This paper adopts normative and positive research method. Firstly, the thesis limits the connotation of earnings management and corporate governance clearly, and does a systematic summaries and combing on theories of them. Then, the thesis adopts normative research method to analysis the effect of external and internal governance structure on earnings management respectively. And the positive research of this thesis includes two parts: measuring the level of earnings management and the positive research on the effect of corporate governance structure on earnings management. In the first part, this paper uses cross-sectional modified Jones model and cross-sectional expanding Jones model to do regression analysis respectively according to the financial data of each industry, and chooses the better model by comparing the regression results to measure the level of the earnings management. In the second part, this paper considers three aspects of the corporate governance structure including ownership structure, boards of directors and board of supervisors and put forward nine theory hypotheses about the relationship between earnings management and corporate governance structure based on the normative analysis. Moreover, this paper adopts A-share of Chinese stocks market including Shanghai and Shenzhen in 2006 as a research sample and uses OLS multi-linear regression analysis to prove those theory hypotheses.At last, the thesis draws some conclusion by empirical study. (1) The relationship between the shareholding ratio of the first shareholder and earnings management takes on the shape of"U". That is, when the shareholding ratio of the first shareholder is much less, there's much earnings management; while the shareholding ratio is in excess of a particular value, there is a significant positive correlation between them. (2) There is a positive correlation between earnings management and the ratio of the state shares. (3) The ratio of corporate shares does not confine earnings management. (4) A negative correlation is found between the ratio of tradable share and earnings management. (5) No evidence shows the scales of boards of directors can affect earnings management. (6) Earnings management is negatively correlated with the proportion of independent directors. (7)The level of earnings management is much higher when the general manager and the board chairman is the same man, which suggest it will weaken the ability of supervising managers when board chairman concurrently acts as a general manager. (8) There is no correlation between independent audit committees and earnings management. (9)The scales of boards of supervisors can't affect earnings management.Based on the above research conclusions, corporate governance structure can significantly affect the level of earnings management, and there are still some deficiencies in the corporate governance structure of our listed company. Those research conclusions of this paper can supply some reference to how to improve the corporate governance structure, especially the internal governance structure.