A Study On The Relationship Among Corporate Governance, Top Management Turnover And Earning Management

With the development of China Stock market, issues on earning management have been paid more and more attention by creditors, stockholders, government stock supervision department and all the other earnings relevant groups. At first, this paper reviews relevant researches, and uses game analysis to study outgoing mamagement's earnings management, behavir and makes an empirical analysis on earnings management induced by top management turnover. On this basis, it makes a comparative study on the relationship between top management turnover and earning management in the different shareholders, supervisors, independent directors governance structure.On the basis of former research, this paper selects companies listed in Shanghai and Shenzhen during 2003-2008 as research object, and remove ST,*ST,new listed company and the companies in which data is incomplete. Then the sample is 4300. Regarding to research methods, earning management is estimated by a Jones Model with using the total accruals before below-the-line items as estimated characteristic parameters according to industry. This paper uses T Test, Correlate Analysis, and Liner Regression Analysis to make an empirical analysis on the relationship between the corporate governance, top management turnover and earnings management.The result of research shows: (1) In order to receive larger bonus and career reputation, routine turnover of chairman increases discretionary accruals(DA), with the evidence being stronger on the final year than two years. That is, the outgoing chairman general will increase (DA) in the final year to create conditions for a higher salary or reputation. (2) There is no evidence which shows the manager increases DA before routine turnover. The results are still insignificant in the group testing according corporate governance. It notes that the chairman is the real key character as the agents in the principal-agent relationship in Chinese Listed Companies. (3) Perfectly governance mechanism can successfully mitigate the earning management caused by chairman turnover. Finally, according to this paper's findings and conclusions, it puts forward that optimizing governance mechanism and establishing long-term reputation mechanism in top management market is a matter of urgency.