Study On The Impact Of CEO And CFO Staggered Terms On Earnings Management

In Chinese capital market, because of abusing accrued and real activities to manufacture the profit, the phenomenon of accounting information quality decreasing appeared. How to effectively reduce earnings management, further improve the quality of accounting information and protect the investors’equity have been a hot topic. The tenure heterogeneity of executive team can lead to differences in values and mistrust. What’s more, it also can reduce the frequency of exchange, lead to the obstacle of communication and then reduce the cohesion and integration of the whole group. On the side of corporate, this is a double-edged sword. This paper tries to start from the positive impact of the executive heterogeneity on the corporate behavior to explore the impact of the staggered terms between CEO and CFO on earnings management. This study provides a new perspective for regulatory to govern the earnings management and helps the investor assess the value of the company better.This paper is based on the depth theory study of the earnings management and executive team heterogeneity. Firstly, the study applies principal component analysis for eight indicators to build a corporate governance integrated indicator—Gindex by choosing 10857 data between the year of 2007and 2012. Due to the difference between the missing data and extreme values of accrual earnings management and real earnings management, this paper studies the relationship of CEO and CFO staggered terms and earnings management by dealing with raw data to get 4154,4743 mixed data samples for accrual and real earnings management to build the regression equation.The results showed that CEO and CFO staggered terms is negatively related to the earnings management. Moreover, the direction of CEO and CFO staggered terms have significant difference on the impact of earnings management, when the CFO term is later than CEO, degree of the earnings management can be reduced more. In addition, under different corporate governance level, CEO and CFO staggered terms have significant difference to the impact on the earnings management. The more perfect the corporate governance, the greater inhibition of the staggered terms to earnings management. The paper not only provides new evidence for executives team tenure heterogeneity influencing on the stakeholders, but also provides a new perspective for the study of earnings management and makes up the vacancy in the research field.