A Study On The Influence Of Corporate Governance In Chinese Listed Companies On Earnings Management

In recent years, there were many cases of earnings management using by listed companies in China. Research results have also shown that earnings management is common in China. Earnings management decreases the quality of the disclosure process of listed companies, which goes against the development of the capital market.Corporate governance is the fundamental reason for earnings management of a modern company. Thus this thesis will analyze the relationship between corporate governance and earnings management, and then empirical study will be done using data of China's listed companies.In theoretical part, this thesis builds up a model base on agency theory. The conclusion is that both corporate governance and earnings management stem from the agency relationship, and they restrict each other. In the empirical study, we built up an econometrics model to test the relationship between corporate governance and earnings management. It is found that the percentage of share that the largest shareholder holds has a U shape relationship with earnings management; the proportion of independent directors is negatively related to earning management; the share proportion of second to ten largest shareholders, the frequency of meetings hold by supervisor's council, and the share proportion of managers, are all not related to earnings management. Then time dummy and cross items were added in the model, we found that as time went by, the improvement of corporate governance has bring the decrease in earnings management.Based on this, we know that improving the quality of corporate governance will be the best way to solve the problem of too much earnings management. The ways that should be done includes for aspects:the structure of share, the board composition (number of independent directors), the supervisor's council, and the manager's incentives.