CEO Characteristics And Earnings Quality

Since the reform and opening up, China's economic construction has made remarkable achievements, and the capital market plays an increasingly important role in the process of China's economic development. Efficient capital markets can achieve the optimal allocation of limited financial resources, and safeguard the legitimate rights and interests of stakeholders. However, due to China's capital market regulatory mechanism is not yet sound, for their own interests, CEO may use their power to manipulate financial information. This has led to the frequent occurrence of financial fraud cases, especially in the case of earnings information, which seriously hindered the normal function of capital market, and damaged the legitimate rights and interests of the stakeholders. And whether CEO will manipulate earnings information, what form, what means, are subject to the impact of CEO's own characteristics.Based on the sample of listed firms in China during the period from 2007 to 2014, this paper investigates the impact of CEO characteristics on earnings quality.The results show that: CEO characteristics have important influence on earnings quality. But CEO characteristics have different effects on different earnings quality indicators. When measured by ERC, The more shares CEO hold, the longer of the tenure, the lower education level, the younger of CEO, the lower of wages, the better earnings quality would be. CEO duplicity has significant negative effects on earnings quality. When measured by DAcc, The results show that: CEO with higher education level are more likely impossible to implement earnings manipulation. CEO with shares and have high salaries are more likely to implement earnings manipulation for rent-seeking. CEO age has a significant positive influence on DAcc.The conclusions show that when owners focus on different aspects of earnings quality, the CEO selection should be based on different standards. When companies pay more attention on the reliability, stability, sustainability of earnings and capital market recognition in the future. Company should select younger and lower-levels education CEO, and avoid unnecessary CEO replacement, maintain the stability of the CEO, giving greater equity incentive compensation and set a lower wages level.When companies pay more attention on the cash flow ability, Company should select highly educated, younger CEO, and set a lower bonus pay levels, and take measures to ensure that the board of directors play its role in the governance mechanism.