Research On The Relationship Between External Governance Environment And Earnings Management Of Listed Companies

Accounting information of listed companies is an important basis for investor, the quality of accounting information disclosure determines whether the capital market development is healthy. Chinese capital market is in a special period which called "emerging and transition", the external governance environment is not very perfect. In recent years, the earnings management is come out after other. The earnings management damages benefit of the investor and finally impact on the effective allocation of resources. Earnings management has been a hot issue in finance research area. Therefore constraint earnings management is very urgent.In China, the unbalanced regional development existing in the process of economic growth has exerted a major influence over earnings management and governance of listed companies. From the perspective of external governance environment, applying data of836companies listed on Shanghai and Shenzhen Exchange from2003to2009, this paper reveals the regional distribution characteristic and law of earnings management, verifies the effect of external governance environment in different regions on earnings management, and studies the role of substitution and protection played by corporate governance in poor external governance environment by OLS regression.The research shows (1) from the perspective of economic geography, it can be found that there exists a remarkable phenomenon of local spatial cluster in external governance environment and earnings management of listed companies, whose distribution characteristics conform to some regularity, of various regions in China, namely, facing the most favorable external governance environment, companies in east China have the lowest degree of earnings management; companies in west China are confronted with the worst external governance environment and their degree of earnings management is highest in three regions; companies in central China are intermediate in both external governance environment and degree of earnings management;(2) earnings management of listed companies is affected by external governance environment, which means companies in region with higher marketization degree, less government interference and more perfect law environment have a lower degree of earnings management;(3) the differences of corporate governance may significantly influence the relation between external governance environment and earnings management, to wit, the improvement of corporate governance can effectively reduce the negative effect of external governance environment on earnings management.