Board Of Director Characteristics And The Accounting Conservatism

Effect of accounting conservatism in accounting practice in at least the past 500 years, according to the American experience data, nearly 30 years in accounting practice is being strengthened. The provisions of the new corporate accounting standards released in February 2006: "The business transactions or events accounting recognition, measurement and reporting should be maintained due care, should not be overvalued assets or income, assets or underestimate costs, however, our country. new accounting standards gives managers the right to be assessed according to changes in the market value of assets, which means that basic information asymmetry, management may choose aggressive or conservative accounting policies according to their characteristics and psychological preferences to determine the robustness of the financial reporting paper use Basu(1997) model of accounting conservatism improved version of Khan and Watts(2009) model to calculate the listed company’s accounting conservatism, the average age of the board test and age heterogeneity, concentration of remuneration Board ownership change listed relations between accounting conservatism. to provide further empirical evidence to improve and enhance the efficiency of corporate governance, as well as from the perspective of protecting the interests of investors starting to improve further theoretical and empirical evidence to support the shareholders to appoint a director candidate. empirical research herein specific conclusions are as follows:(1) The higher the average age of board members of listed companies accounting conservatism higher. With increasing age, risk awareness will become increasingly strong, may be more inclined to strictly control risk, to take a more prudent accounting policies, thereby improving the accounting conservatism. Relatively speaking, the average older board members are more concerned about the long-term stable development of enterprises, generally make strategic decisions tend to choose less risky strategic decisions. Thus, the average age of board members, the more prudent accounting policies favor. Higher accounting conservatism meant more timely confirmation of the bad news, investors are more conducive to the timely detection of risks, protect their own interests. Therefore, from the perspective of the protection of investors, the choice of board members can be considered appropriately selected older and experienced candidates as directors of the Company, on the one hand to control the risk to provide more experience, on the other hand help to improve accounting conservatism.(2) Age Board members heterogeneity smaller listed companies accounting conservatism higher. Following the same social theory, the average age of board members heterogeneity is smaller, the degree of difference between the younger. At about the same age, generally have similar experiences and similar values, more harmonious relationship between each other, in which cognitive and values more easily reach a consensus, improving enterprise efficiency and decision-making levels, and promote long-term stable development of enterprises, thus more inclined to adopt a more prudent accounting policies. On the other hand, members of the Board of age heterogeneity of the greater degree of recognition among the directors of the psychological likely to fall, thereby affecting decisions. Accordingly, the Board of age heterogeneity of the greater decision-making is difficult to reach an agreement opinion, for their own benefit, may reduce accounting conservatism to achieve the expected return. Starting from this conclusion, we recommend investors to choose candidates closer to the age when selecting board members of listed companies as a director of the Company, on the one hand to reduce the differences in values, improve decision-making efficiency, on the other hand is easy to reach a consensus, reduce heart differences resulting from damage to corporate value.(3) The remuneration higher the concentration, the Public Company Accounting robustness worse. Previous literature also believes that the proportion of the top three executive compensation is higher, the stronger the control of managers, the more likely the strong performance of the overall level of investment companies, the internal expansion of a significant impact, but in in this case, the manager implemented expansion strategy is likely to be inefficient. Incentive pay is a double edged sword, on the one hand may be management’s job to play the role of incentives, but on the other hand may also lead to overconfidence managers, for their ability to produce cognitive bias, to achieve their own maximum reward purpose, to adopt a more aggressive policy to accounting earnings management, resulting in reduced accounting conservatism. Therefore, from the perspective of the protection of the interests of investors, investors consider the directors’ remuneration, it shall take due account of the balance of each director’s remuneration, so as to avoid the pay is too concentrated, resulting in higher salaries director position too heavy, the performance is very strong, when business decisions to maximize their returns as the core, and to adopt a more aggressive accounting policies that affect accounting conservatism.(4) The number of shares and the Board of Directors to increase the robustness of the Public Company Accounting negative correlation. The results show that the Board of Directors to increase the number of shares may be the reason for overconfidence, and overconfidence bias may lead to mental over-investment managers, to adopt a more aggressive accounting policies to achieve the expected benefits, thereby reducing the accounting conservatism.. In the separation of ownership and management of modern enterprises, enterprise managers have the resources to have a decisive influence corporate behavior, the owner of the shackles managers often limited. Based on an analysis of the performance of the above, the Board of Directors as one executive, the number of shares is increased confidence, which Sunguang Guo, Zhao Jianyu(2014) uses the same management as the increase in the number of shares the management overconfidence substitution variables studied overconfidence and think the management of listed companies accounting conservatism was a negative relationship between the conclusions of the study are consistent. Of course, the Board may increase the number of holdings is based incentive, placement, bonus and other reasons, it is inevitable, but excluding these reasons, the Board of Directors to increase the number of shares to some extent still reflects the negative impact of accounting conservatism exists Therefore, investors should pay attention to the board of directors to increase the impact of the number of holdings that may exist.