Study On The Relation Between Independent Director System And Earnings Management

In accounting academy of foreign countries, earnings management has been a research subject for years. Subsequently in China, the research work of earnings management is also in process, which is very hot today. A listed company's earnings management make the company's earnings information deviate form a company reality, bring about accounting information lacking fidelity, quality of accounting data is low, and do not reflect a company's financial status and managing performance. Not only distorts stock value, disturbs capital market order, moreover misleads the decision-making of investors, damages the extensive investor's benefit. The defect of listed companies' corporate governance structure provides many chances and space for earnings management; our country introduced independent director system to perfect a listed company governance structure because of this, at the right moment. The purpose of setting up an independent director in a listed company is under the condition of lacking superintending mechanism in the company, and expect the independent director play the role; being able to countervail a strong stock holder, keeping watch the company administrative behavior and monitoring listed company's behavior of breaking the law or violating regulation, in order to improve a listed company financial information, protect shareholder's benefit. But, at present, independent director does not play role in the corporate governance structure, there are large amount of behavior of breaking the law or violating regulation in the listed companies, earnings management also are common existence.This paper makes a research on the validity of independent director's system in terms of earrings management. This paper makes a research on the validity of independent director's system in terms of earnings management. We regard listed appliance companies in 2008 as samples and use statistical method to investigate the validity of independent director's system-based on the proportion of independent directors,the change of independent directors,the remuneration of independent directors,the number of independent directors to attend the board of directors. We draw following conclusions: the more proportion of independent directors and the number of independent directors to attend the board of directors, the better earnings quality will be. Remuneration of independent directors should be set at a reasonable level, it should not set too high not only affect the independence of independent directors, but also should not set too low to affect the enthusiasm of independent directors. Through profound thinking ,we put forward some corresponding countermeasures on how to improve the earnings quality.