The Influences Of The Board Of Directors’ Political Relevance On Corporate’s Earning Quality

In recent years, the researchers of the political relevance gradually found thatexecutives’ political relevance, as a kind of intangible but valuable resources, whichaffects every aspects of enterprise, based on it, the domestic and foreign scholars havelaunched a wave of political relevance effect research. Among them, part of theresearch results show that the political relevance can bring convenience for enterprisefinancing channels, enjoy more preferential tax policy or lower taxtation, to reducethe risk of diversified management, improve enterprise’s value; But also some studiessuggest that although politics relevance can bring some advantages and convenienceto enterprises, but the enterprises have to pay a high price, even sometimes a far morethan its cost of enterprise for the enterprise benefits, and finally a great negativeimpact have been happened to the enterprise as a whole.This study mainly focus on how political relevance of the board of directors ofprivate enterprises could impact on enterprises’ earnings quality, and under differentmarket level the correlation between the two. Taking private enterprises of theA-share of Shanghai and Shenzhen from2009-2011as the research samples, andusing entropy weight systhesis to calculate the1285samples’ earnings quality, thenstudy the influence of political relevance and earnings quality by regression analysis.On the definition of political relevance, this article will divided the political relevanceof enterprise board members into two big level and four small level, one of the bigaspect refers to the direct political relevance and indirect political relevance, foursmall level refers to the People’s Congress representatives or political consultativeconference committee members, the government sector work experience, governmentadviser, guild leader status, and the NPC representatives and CPPCC members, thegovernment sector work experience of the political context is divided into directpolitical relevance, government adviser identity with industry association leaders aredivided into indirect political relevance. Finally the results showed that:(1) the directpolitical relevance has significant negative on enterprise’s earning quality, and indirect political relevance has no significant impact on the earning quality;(2) in lowmarketization level, the stronger the political relation, enterprise "down" earningsmanagement motivation is stronger, then the earning quality of enterprise is lower;And in the high level of market region, the political relevance has no significantimpact on the enterprises’ earning quality.In this paper, the research to a certain extent, enriched the empirical analysisresults in the field of political relevance, and for Chinese private enterprises in themarket economy transformation provides some empirical evidence. Research resultsshow that as a kind of invisible resources of enterprise-political relevance does notnecessarily will give enterprise an positive influence, to some extent, it can bringsome negative effect to enterprise information quality. Therefore enterprise can notblindly to choose any political relevance director in order to achieve their interests’goals. As a kind of informal complement of market mechanism is not sound, weshould be rational view of the political association.