Research On The Relationship Between Executives’ Origins And Earnings Management Under The Perspective Of Executives’ Tenure

Along with our country securities market gradually become mature, the problem of earning management turns more obviously. As the senior managers, Corporate executives is shouldering the responsibility for the owner. Therefore, driven by its own interests and environmental pressure, Executives become one of the operators of the earnings management. In the pursuit of innovation and vigor, Enterprise will constantly change in the process of operation. However, executives at frequent replacement will inevitably affect earnings management. When corporate executive changes, different sources of succession of executives in the office have different career planning, thus their motivations of earnings management will become differences. At the same time,the tenure of executives has become a problem that companies often face to. The reason is that the tenure of executives belong not only a matter of time, but also one of their management problems. At different points in their tenure, executives may be based on their own demands and the overall status of their own business to make different decisions. That is, on one hand, the tenure can make executive management with an open and positive thinking, and it also can make executives’ learning behaviors with sufficient power to achieve the management objectives. But on the other hand, the tenure may make executives become blind confident, conservative, stubborn and narrow-minded thinking that lead to departing from the essence of corporate management. Then, under the premise of business tenure, the issue how will the change of executives affect earnings management deserves our in-depth research.For the Board of Directors, the standard of choosing executive candidates is to generate the benefit to improve or maintain the status of the company. So they not only confined to the choice of executives within the business promotion, they will set their sights on the appointment of external. Faced with this trend, we study how the executives from internal promotion and external appointment affect corporate earnings management. Meanwhile, we also study that whether external recruitment and internal promotion executives can make different impact on earnings management in the different point of the whole term of office.Firstly, the paper introduces the basic connotation and theoretical basis of earnings management, which leads to earning management behavior and motivation. Secondly,we examined the potential relationship between earnings management and the sources of executives. My research shows that after serving several years external executives will reduce the concern about the effect of earnings management, earnings management can become low-cost strategy to improve the current financial reporting profit. Since the external appointment of executives eager to show that they have the ability to improve business performance, as compared to the internal promotion of executives, the short-term appointment of external executives have stronger incentive to manipulate earnings management. However, if these external appointment executives were had a chance to stay longer, then their objective and the way to manipulate the earnings management will change. Therefore, we expect long-serving internal promotions and external appointment of executives have similar behavior on earnings management.