A Study On The Relationship Between Board Characteristics And Accounting Earnings Cautiousness

In recent years, cases involving account book fraud, profit manipulation from the administration in listed companies happen occasionally. Issues concerning information of accounting data have aroused widespread concerns. The core of these issues is accounting earnings conservatism, which is one of the important characteristics of accounting information quality. However, as an important factor of internal administration inside listed companies, the board can effectively pose enough supervision towards the behaviours of the administration. Therefore, through combined analysis of the data from listed companies on a statistical basis, this paper intends to systematically analyze the relationship between the characteristics of the board and accounting earnings conservatism, and thus tell whether the board of domestic listed companies can affect accounting earnings conservatism by the supervision of administration’s behaviour, and with whose result, this paper will offer related advice to improve accounting earning quality through increasing the administration efficiency of the board.This paper quotes sample data of A-share listed companies between2008and2012. By utilizing the Basu’s improved model and combining Khan and Watts’C-score method, the paper intends to calculate the accounting earnings conservatism of a company. First of all, the paper verifies the existence of conservatism inside domestic listed companies. Next, certain variables (including size of the board, situation of separation of two roles, i.e. general manager and chairman of the board, proportion of independent directors, establishment of audit committee and number of the board’s annual meetings, etc.) are selected from characteristics of the board and are combined into supervision strength. With the method of multiple linear regression, the result is used to analyze the relationship between the board’s supervision strength and accounting earnings conservatism. The result indicates that accounting earnings conservatism rises with the board’s supervision strength. Next, according to five related characteristics of multiple regression, size of the board, separation of the two roles, establishment of audit committee all pose conspicuous positive relationship towards accounting earnings conservatism; proportion of independent directors does not directly relate to accounting earnings conservatism; number of the board’s meetings merely poses inconspicuous relationship towards accounting earnings conservatism. At last, analytical discuss is carried out on the result of the analysis and conclusion of the paper is drawed. Meanwhile, some recommendations on the improvement of institutions of the board are given with the purpose of increase accounting earnings conservatism.