Board Characteristics And Earnings Conservatism

Conservatism as an important quality characteristic of accounting information plays an important role in coordinating related issues arising from information asymmetry between shareholders and management. There are many factors which affect the accounting conservatism, such as contract, accounting system, etc. This paper chooses the internal factor——the motivation of managers to study earnings conservatism. Because of various motivations, managers often manipulate accounting surplus for their own interests. And as an important governance mechanism, the board of directors plays an important role in supervising management behavior. Therefore, this article will run the empirical test between the board of directors and earnings conservatism based on the listed company's date to draw the conclusion that the board of directors can affect earnings conservatism through supervising the management behavior, and then put forward related suggestions to improve the quality of accounting information through improving the management efficiency according to the empirical results.Firstly, I select the listed companies in Shanghai and Shenzhen stock exchange from 2007 to2008 based on the new Accounting Standards as the research object, choose the five characteristic variables as explained variables including the size of the board, the leadership structure of the board, the proportion of the independent directors, audit committee of the board and the conference quantity of the board, and then uses basu model to test the relationship between the boards and the earnings conservatism. Secondly, I come to the following conclusions through empirical test: Earnings conservatism is positively associated with the separation between chairman and CEO and the establishment of the Audit Committee; the association between earnings conservatism and the proportion of independent directors is not significant; the earnings conservatism is associated with the size of the board and the conference quantity of the board within a certain range. Finally, I come to the conclusions of this paper on the basis of the analysis and discussion of the empirical tests, meanwhile put forward some suggestions for the development of system of the boards in order to improve the quality of accounting surplus.