| Academic research has focused on the effectiveness of corporate governance, but the research are concentrated in tradable or executive incentive and other aspects, while ignoring the management of the human body with the initiative. The power of CEO, who as the highest authority in the management of the daily management of the company, will be able to influence decision-making in the extent to which even the entire company’s strategic decisions. In recent years, a serious distortion of accounting information and a large number of financial reporting restatement event have been happened in the domestic and international capital markets. According to this, investors could not get high-quality financial information and suffer the great harm. July2002, the United States enacted the "Sarbanes-Oxley Act" to strengthen the responsibility of executives, requiring CEO must own name on the authenticity and accuracy of financial reporting assurances.Due to the presence of the agent’s commission and asymmetric information, CEO may achieve by means of financial restatements selfish purposes by using their power. The relationship between CEO power and the audit committee and CEO power and the financial restatement has been determined by scholars from abroad and draw the conclusions. But, few studies has been made to determine the relationship. Thus, there are still many issues worthy of study in terms of power and financial restatements CEO relationship. Therefore, in this study, we will explore what factors in the power of the CEO will affect the company’s financial restatement happen and how to influence it.In the current study, we made a review about the status of CEO power and financial restatements at home and abroad, and combined with China’s actual situation. In the further study, the company’s growth theory, agency theory and management theory were used to define the concept of CEO power and financial restatements. Based on the theory of power management by Finkelstein (1992), CEO power was divided into four aspects:organizational power, ownership power, expert power and authority. The four dimensions of CEO authority were used to establish the company’s financial underlying assumptions and theoretical models.519samples, financial restatements happened, from Shanghai and Shenzhen A-share listed companies from2009to2012were selected. Meanwhile,519companies without financial restatements and with the similar region and size were selected as the paired samples. Empirical research method was used to explore the relationship between CEO power and financial restatements. Whether financial restatement occurred was listed as explanatory variables and ten explanatory variables such as chairman and CEO two hats-one, board size, the proportion of independent directors, CEO salaries accounted for the proportion of executive pay, the proportion of CEO ownership, nature of the business, the largest shareholder stake, CEO Age, CEO education level, CEO tenure were used as explanatory variables. Logistic regression was used for empirical analysis.Our results have been shown that:(1) selected explanatory variables both have a significant relationship with financial restatements;(2) independent directors positively corrects with financial restatements and contradicts the proposed assuming, thus reject the null hypothesis. According to that the country’s independent directors have good professional skills but did not play better supervision and professional skills, it indicated the proportion of independent directors is not as high as possible;(3) the analyze between the percentage of CEO salary in total executive pay and financial restatements rejected the original fake and the percentage of CEO salary in total executive pay positively corrects with financial restatements. It indicated that the enhancement of CEO position will lead to CEO arbitrary and for their own profit, would interfere with the normal operation of the company’s business to a certain extent. Thus, the company could not be strictly managed in accordance with the Board on the financial arrangements for the policy and financial restatements appeared. Finally, based on the actual situation of Chinese and in order to strengthen and implement the independent director system and proper implementation of CEO power control and incentive policy aspects, related policy recommendations was proposed by us. Our study would make some contribution for promoting the reform of financial system of China’s listed companies, understanding of the system CEO, guiding the listed company CEO authority to set reasonable size, reducing the probability of the occurrence of the phenomenon of financial restatements and promoting the improvement of China’s listed company management structure. |
PDF Full Text Request