Empirically Analysis The Relationship Between The Characteristic Of Corporate Board And Financial Reporting Fraud

Since the last century, Listed companies’ financial reporting fraud cases havebeen Frequently broke at home and abroad. Financial reporting fraud causedwidespread concern in the community again. People can not help but reflect on withthe rapid development of the securities market，how to prevent the occurrence offinancial reporting fraud. Board of Directors as the corporate governance structure ofthe core component plays an important role for the prevention of financial reportingfraud. Therefore, the study board characteristics and the relationship between thefinancial reporting fraud is very important.Board size、the proportion of independent directors、leadership structure of thecompany、director equity ratio、board meetings、audit committee and the resignationof director are seven important indicator of board characteristics.This paper focuseson the seven indicators of fraud with the company’s financial reporting relationship.The samples of the paper are divided into two groups, one is the fraud companiessample and the other is non-fraud companies sample. The fraud companies samplesare found from2005-2010between the Shanghai Stock Exchange (referred to as theShanghai Stock Exchange) and the Shenzhen Stock Exchange (the Shenzhen StockExchange) website "listed company credit record" column has been publiclycondemned the disclosure of listed companies. Comparison samples’s asset size andmarket exchange are the same or similar to the fraud companies samples’ and they hasnever been investigated by the Commission, the Shanghai Stock Exchange or theShenzhen Stock Exchange, made a criticism, administrative penalty or public censure.Empirical studies have shown that, corporate leadership structure and financialreporting fraud was a significant negative correlation. This shows that in the currentcorporate governance structure,"dual leadership structure" is one of effectivemeasures to prevent financial reporting fraud. Board meetings and financial reportingfraud was a significant positive correlation, this indicates that the increase the numberof board meetings cannot help reduce the chance of financial reporting fraud.However, whether there is still much controversy as possible in the number ofmeetings of the Board needs further study. The resignation of director and financialreporting fraud was a significant positive correlation, this shows that in the face ofhigh-risk directors often choose to "vote with their feet." Therefore, pay attention onthe resignation of director of the board of listed companies can help found thecompany’s financial reporting fraud. The other four assumptions are not passed asignificant test, although they correlated the financial reporting fraud, but therelationship is not significant. Chapter IV of this article also made a number of policyrecommendations. Respectively, select the appropriate size of the board; select theappropriate composition of the Board; improve the quality of board meetings.The relationship between board characteristics and the financial reporting fraudhas been a hot research scholars, there are still a lot of controversy about some factors.This paper has studied the traditional characteristics of the company board, they areboard size, proportion of independent directors, the company leadership structure, board meetings, directors equity ratio and the Audit Committee. Moreover, therelationship between board of executives as well as whether the resignation was theST and financial reporting fraud is also been researched. The paper has made additionon this study.