Study On The Effects Of CEO's Financial Background On Accounting Information Quality

Chinese Criminal Law and Accounting Law and other laws regulate clearly heads of the enterprises should be responsible for the accounting information. CEOs are responsible for the financial reports which reflect the operating outcomes of a company. Under the limitation of knowledge, individuals'decisions can not be considered roundly. The various backgrounds of CEOs will undoubtly affect their decision-making and the operating of the company. For CEOs with financial background, they may pay more attention to the finanical work quality, and they understand the consequences of financial fraud better due to their financial background. There are managerial differences between those with financial background and CEOs with other background which have reference value for investors choosing investment targets, so it is worth exploring how does CEO's financial background will affect accounting information quality.Based on upper echelons theory, principal-agent theory and information asymmetry theory, this paper analyzes the intrinsic relationship between the CEO's financial background and accounting information quality. Then add ownership structure into the research. The empirical analysis is based on data in China A-share listed companies from 2010 to 2012, examining the assumptions mentioned in this paper. The empirical analysis results show that CEOs with financial background can positively affect the quality of accounting information under behavioral preferences and regulations'dignity; ownership structure could affect that relationship, equity balance degree and state-owned holding company can both positively improve that effect, while ownership concentration plays a negative role in the improvement effect.At last, suggestions are offered in setting of CEO selection standard, CEO decision-making mechanism, raising the cost of top managers'financial fraud and improving the equity supervision ability according to the findings. Those would enable CEO use power in a standardized system, and increase the legal risk and economic cost of CEO's financial cheating.