Corporate Governance Structure Of The Listed Company On The Real Earnings Management

Earnings management is one of the focuses of the current accounting researches, which imposes the increasingly important influence on the stakeholders of the company and the capital market. Earnings management practices disable the accounting earnings information to demonstrate the real operating performance of the enterprises, which is unfavorable to the optimal allocation of resources. Furthermore, the earnings management will also impact the investing decision-making of the stakeholders and even damage the healthy development of capital market. Factors affecting earnings management are various, but what remains fundamental is the flaw of the corporate governance structure. The important reason leading to the exercise of earnings management came down to the principal-agent relationship brought by the separation of two powers. The corporate governance structure of the company is exactly a product of the separation of power, and also serves as a mechanism to coordinate interests between stakeholders. The healthy corporate governance structure is necessarily able to constraint the creation of earnings management practices. Hence, this research is from a perspective of the corporate governance structure, to study the relationship with the earnings management.Earnings management includes accrual earnings management and real earnings management. Accrual earnings management refers to practices to control earnings by changing accounting methods and accrued items, while the real earnings management means the practices of managers to create the earnings management by formulating real transactions or controlling time when the transactions occur. Since the enactment of New Accounting Criterion in2006, related laws and regulations are being improved while regulations have been strengthened. The possibility of using accrual items to control earnings is exactly reduced, which drove some companies to make use of real earnings management to modify the accounting statements. These companies will fabricate some really existing and controllable transaction activities that can affect the earnings to realize the purpose of having surplus. Compared to the accrual earnings management that only affect the accrual profits while does not impact the cash flow, the real earnings management will influence both the cash flow and the current surplus. In some occasions, even the accrual profits will be affected. Such management practices may be beyond the optimal business decisions of the company, which neither increase the value of the company, nor benefit the healthy development of the enterprise. These practices may be potentially dangerous to the capital market since they will hardly be discovered by auditors and supervising departments. Therefore, researches on the real earnings management become increasingly important. Because of this, this research will start with the analysis on real earnings management and investigate the impact of the corporate governance structure on the real earnings management. The purpose of conducting this research is to help curb the real earnings management from a perspective of managing a company and to further contribute to regulate, develop, and improve the capital market.After a brief analysis of the importance of real earnings management and its impact on the feasibility of real earnings management studies from the perspective of corporate governance to get research ideas:This paper first reviews the relevant literature on real earnings management and the relations with the corporate governance structure; Secondly theoretical analysis about the real earnings management and the corporate governance structure, and then propose research hypotheses in this paper. Then, combining the characteristics of China’s capital market, select the appropriate study samples and propose research models. Finally, according to the results and combining empirical and theoretical analysis of the texts, draw conclusions of this study.The structure of my study is as below:The first chapter is bout introduction. Briefly introduces the research background, the structure of the arrangement ideas and so on. The second chapter is about literature review. The third chapter is about theoretical analysis. This part includes three theoretical earnings management, theoretical analysis about the real earnings management and the corporate governance structure. The fourth chapter is about research hypothesis. The fifth chapter is about empirical research and correlation analysis. The sixth chapter is about conclusions and policy suggestions. Combining theoretical and empirical analysis, get conclusions of this paper.The conclusions of this paper:First of all, in terms of ownership structure, the largest shareholders have U-shaped relationship with the real earnings management, the second largest to the tenth largest shareholders have positive correlation with the real earnings management, the level of real earnings management is lower in state owned enterprise; in terms of features of the board, the board size has a negative correlation with the real earnings management, independent directors has an insignificant negative correlation with the real earnings management, the chairman and the general manager are syncretic has positive correlation with the real earnings management; in terms of features of the board of supervisors, the number of meetings of the supervisory board has an insignificant negative correlation with the real earnings management, the size of the supervisory board has a negative correlation with the real earnings management; in terms of management incentives, manager shares has a negative correlation with the real earnings management and executive compensation has a positive correlation with the real earnings management.Major Contributions of this research are as followed:(1) This research integrated the analysis on corporate governance structure and the real earnings management, drawing a conclusion that may enrich the researches in this area. Currently, related researches in this area are rare. It is because of this, this research is going to include both the corporate governance structure and the real earnings management into a unified research framework. Through pursuing solid evidence about the relation between these two concepts, this research will be able to make contributions to reasonable measures aiming at curbing the creation of real earnings management practices.(2) Currently, there are a few researches on the same topic majorly focusing on only one aspect of the company management, such as ownership structure, features of the board, and others. This research will focus on four aspects of the management structure:the ownership structure, features of the board, features of the board of supervisors, and management incentives to overall consider the relations of each part of the corporate governance structure with the real earnings management.(3) This research adopted a much more comprehensive indicator to the real earnings management.Limitations of the research are as followed:(1) The data samples used in this research were not sufficiently comprehensive. This research adopted the data from2008to2012. Despite that the sample size was large enough, data were all about the situation after the enactment of the New Accounting Criterion, without reaching the situation prior to the implementation of these standards.(2) The selection of samples and variables in this research were subjective, neglecting many individual differences and special cases. No industry-classified analysis had been conducted. This research still needs to be improved in terms of the selection of the control variable.