Differences Between The Background Characteristics Of CEO And CFO And Earnings Management

In recent years, many financial fraud cases have been found, we should give more and more attention to the authenticity of the company’s earnings information.On the one hand, the company’s executives’performance depends on the earnings figures, on the other hand, it is just the company’s executives who are responsible for the earnings figures,so they have an incentive to control the company’s earnings in order to deceive investors, regulators and debtors, etc. Among the company’s executives, CEO and CFO are the most responsible person for the financial report, the cooperation of them has a direct impact on the quality of the earnings information, so this paper will focus on the relationship about the company’s earnings management and the individual differences between CEO and CFO.Based on the TMT theory and extensive literature reading, we proposed five hypotheses and made the following empirical research:Firstly, we do some research on the ralationship between the CFO’s background with the company earnings management.Secondly, we do some analysis on the relationship between the background differences of the CEO and CFO and the earnings management.Lastely, we do some further more study by driving every difference into details.We get the following conclusions:The age, education degree, and term of CFO has a significant negative correlation with the degree of earnings management. Tenure-differences of CEO and CFO can significantly reduce the company’s earnings management.Only in the non-state-owned enterprises, if the CEO and CFO have different gender, it will help to reduce the company’s earnings management.In the full sample, The age-differences and education-differences between CEO and CFO showed a significant positive correlation to earnings management. After driving every difference into directions,wo found that if the CEO is older than the CFO, the age-difference will have a significant positive correlation with the company’s earnings management.If the CEO get higher education than the CFO, the education-differences will have a significant positive correlation with the company’s earnings management. If the CFO took office earlier than the CEO, the tenure-differences will have a significant nagative correlation with the company’s earnings management.This stady has not only enriches the further use of TMT theory, but also broadens the perspective for the research on company’s earnings management. CFO’s personal background characteristics, and the differences between him and the CEO will impact on the company’s earnings management significantly.What’s more, this paper divide earnings management into positive and negative directions, divide the ownership into state-owned and not state-owned directions, divide the differences between the CEO and CFO into details in order to offer some useful references for companys and the regulatory agencies.