Enterprise Life Cycle Theory, Characteristic Of Independent Directors And Earnings Management

Principal-agent is considered as the key subject in the governance of the board of directors. One of the reasons making principle-agent significant is its breed of varied other problems in corporate governance. Corporate management uses the privileges to the manipulation of profit, for example, by the method.of earning management which results in the. damage of the authenticity of accounting information. Against the background of a rapidly and unstably growing capital market, negative news on the earning management emerges on after another and has become the concern of a wide range of scholars.Theoretically, earning management can be reduced by improving the management of the board of directors, in the process of which the independent directors play a vital role. Yet, scholars in China have not managed to reach a consensus as to the research on the relationship between independent directors and the earning management:some believe that the system is merely a decoration rather than be of practical effect in the curb of earning management; while other do acknowledge that the system has reduced the earning management and consequently improved the quality of the accounting information. Considering aforementioned, it becomes necessary to do researches on the effect of the independent director system on earning management.This paper argues that the characteristic of the IDS and its relationship with the earning management is influenced by a company’s size, the fund-raising capacity and the maturity of the company and the internal and external environment a company to face in its life span. The analysis of cash flow from operating activities, cash flow from investment and cash flow from financing activities combined to differentiate life cycle phase of listed companies, and analyze the growth and decline of the chosen sample as to further supplement the research achievements in the field.This article is divided into five parts. The first part is the introduction, and mainly introduced the research background, research purpose and significance of the topic, the ideas and innovations of this article, as well as the overall framework and research methods. The second part is the literature review section of this article and the theoretical basis for the part of the independent director system;,reviewing the domestic and foreign research results of the independent director system and surplus management and enterprise life cycle theory and earnings management research achievements both in China and abroad in summary, the concept of earnings management and corporate life cycle is defined, and the respective development course and the corresponding measurement methods are analyzed as the theoretical basis for empirical research.. The third part is the empirical research design; this article selects the 2655 observations from the a-share listed companies from 2010 to 2013 measured with modified Jones model for earnings management design the empirical model. The forth part is the empirical result analysis, using multiple regression method to empirical test of the proposed hypothesis in view of the conclusion of test in the previous chapter and for further analysis of the results. The fifth is divided into research and policy suggestions, and the shortage of this article is pointed out. The paper conclude that:(1) growth of the proportion of the board of directors of the listed company of earnings management of brake is more obvious, and mainly for inhibition of positive earnings management control; (2) growth period the proportion of the board of directors of the listed company of earnings management of brake is more obvious, and the main is to curb earnings management control compared to that of recession; (3) the developing background of. the independent directors of listed companies of earnings management effect is not obvious, compared to that of recession. This suggests that the independent directors do play a certain role in curbing the earnings management level. The paper also suggests that the curbing effect of the earning management by the independent board of directors differentiate in different stage of the life span of the listed company.