Research On Financial Restatement From The Perspective Of Corporate Governance

Since the 1990s, financial restatement issues have received much concern from regulatory authorities and academia. In 2006 the Ministry of Finance released "Accounting Standards No.28-Accounting Policies, Changes in Accounting Estimates and Correction of Accounting Errors" and the "retroactive restatement method" was proposed for the first time. The "retroactive restatement method" marks the formal establishment of the system of financial restatement.Financial restatement usually means the failure of corporate governance, so there is a close relationship between financial restatement and corporate governance. Based on this relationship, we select listed companies that released financial restatements during 2009-2011 as sample, and select companies that did not release financial restatements as control sample. We study the relationship between the likelihood and frequency of financial restatement and corporate governance factors such as ownership structure, executive compensation, the board features while introducing size, audit opinions, products competition level, business growth to control. The regression results show that (1) the proportion of state-owned shares, ownership concentration are positively correlated with the likelihood of financial restatement; (2) executive compensation is positively correlated with the likelihood of financial restatement; (3) the possibility of financial restatement will increase with the frequency of board meetings, and those released financial restatement tend to have chairmen also served as general managers; we did not find significant evidence between the proportion of independent directors and the possibility of financial restatement; (4) we also find that the frequency of financial restatements increase with ownership concentration and the frequency of board meetings; (5) the type of audit opinions have a significant influence on financial restatement.The results confirm that the corporate governance has a significant influence on companies’ financial restatement. Listed companies should take advantage of the interactive relationship between corporate governance and financial restatement, improve corporate governance structure. Thereby reducing the incidence of financial restatement, and further improving the quality of accounting information.