Study On The Correlation Of The Listed Corporate Governance And Earnings Management

With the development of our market economy and securities market in recent years,the listed companies often make earnings management to a certain extent for their owninterests, which has become the focus of accounting academic in our country. In themodern enterprise system with separation of the two rights, the structure of companytreatment is the mechanism to solve the conflict of interest between shareholders andmanagers. But our company governance is still not perfect; it creates the conditions forthe generation of earnings management. So studying how the elements of corporategovernance influence earnings management has a great significance.First of all, this paper collate and summarize the literature domestic and overseason corporate governance and earnings management, and then analysis the listedcompanies’ characteristics and relationships of governance structures and earningsmanagement by elaborating the theories of them. Secondly, select2008~2010A-sharelisted companies of manufacturing industry as sample and estimate the extent ofearnings management by extended Jones model which has introduced the main businesscost as variable. This new model is more explanatory by comparison. Finally make anempirical analysis on the correlation of corporate governance variables and earningsmanagement. Create a multiple regression model is as follows: select the extent ofearnings management as the dependent variable, choose important indicators from theownership structure, board characteristics, board of supervisors characteristics andmanagement features as independent variables.Simultaneously company size andasset-liability ratio as control variables. It can be concluded by Descriptive statisticalanalysis and regression analysis that: The proportion of the independent directors and earnings management has negative correlation; whether the two positions of chairmanand general manager are same one is positively related with earnings management;share ratio of the largest shareholder is positively related to the degree of earningsmanagement； the second to fifth largest shareholders accounting for the largestproportion of shareholders is negatively related to earnings management; board ofsupervisors’ meeting frequency and earnings management is not significant correlated;executives shareholding ratio and earnings management has no significant correlation;company size is positively related with the extent of earnings management;asset-liability ratio is positively correlated with the extent of earnings management. Bycomparison of the earnings management correlation from2008to2010, it is also foundthat the proportion of the largest shareholders, the proportion of independent directorsand the proportion of managerial ownership are more significant correlation withearnings management in2010, compared with2008and2009. It is indicated that withthe gradual improvement of our listed companies’ system, corporate governancevariables played a better inhibition on earnings management.According to the conclusion of the empirical analysis, this paper puts forwardtargeted recommendations to the improvement of the internal and external governancestructure， in order to further improve the corporate governance structure, reduce thegeneration of earnings management behavior and promote the healthy development ofcapital markets.