Market Competition Corporate Governance And Financial Restatement

The quality of accounting information is the foundation of the capital market, themassive existence of financial restatements shows that the company’s accountinginformation has some problems. As the characterization of the enterprise surplusmanipulation, financial restatements reflect the defects of the enterprise managementmechanism and low corporate governance efficiency. The deep reason of the poor qualityof accounting information is information asymmetry caused by the principal-agentconflict bring by modern enterprise’s two rights separation. According to the moderncompany governance theory, scientific governance structure may help to prevent oralleviate the agency conflict. By the organization form and system arrangement such usdirectors, supervisors board and managers incentive, reduce the information asymmetryand inspire and restrain the insider effectively. Reduce motivation and possibilities of themanipulation of accounting information disclosure, So as to improve the reliability ofaccounting information. In addition, the modern competition theory provides a newperspective, that is product market competition, bankruptcy threat hypothesis points outthat liquidation threat bring by competition help agent voluntarily reduce agency costvoluntarily, The product market competition can directly affect the quality of enterpriseinformation disclosure, also can affect quality of information disclosure by improving thecompany management indirectly.In this paper, financial restatement is the main research object, the product marketcompetition, the company management and financial restatements organically in unitywithin the framework of research. And according to the Chinese listed companies2006-2009data and empirical tests the related theory. Empirical test are divided into twosteps, the first step, inspect the influence of company governance to the financialrestatements, the second step, divide the product market competition into highcompetitive group and low competition group. In contrast to the high and lowcompetition, the different influence of corporate governance and financial restatementslead to conclusion that the influence of product market competition to the financialrestatements.This paper gets the main conclusion: state-owned companies’ possibility of financialrestatements is less than non-state-owned holding company; the higher first largestshareholder, the smaller likelihood of the financial restatements; More equity distributionof the shareholding, the lower possibility of financial restatements; When the chairman isthe general manager, the financial restatements are more likely to happen. Executivescash salary and executive shareholding has no significant relationship with financial restatements. In the influence of financial restatements, product market competition onthe corporate governance has certain alternative or complementary relationship. Based onthe above research conclusion, this paper puts forward some policy suggestions such asbring into the investment institutions and prevent insider control, foster professionalmanager market, reduce both one condition, and build a reasonable managementincentive and strengthen product market competition.