Financial Expertise Independent Directors And Major Accounting Error Correction

To deal with the special institutional background of the highly centralized stock right and the insider control of the Chinese listed companies,especially the private listed companies.China Commission issued the guidance of the independent director system,which especially emphasized that there was at least one financial expertise as independent directors of the listed company in order to ensure and improve the quality of accounting information of listed companies through the professional knowledge of financial expertise independent directors.Although there are a lot of research literature about the effectiveness of independent directors in corporate governance,the research literature on the financial expertise independent directors especially the relationship between the financial expertise independent directors and major accounting errors is rare.Whether the financial expertise independent directors can play an effective role to improve the quality of accounting information of listed companies and protect the interest of the investors in corporate governance? This paper combines the method of theoretical and empirical analysis and sees the major accounting error correction as the research object between 2007 year and 2015 year in Chinese private listed companies.This paper uses two logistic regression analysis method to study the relationship between the financial expertise independent directors and the major accounting error correction and draw research conclusions.The conclusions and policy proposal of the validity of the financial expertise independent directors of this paper in corporate governance are as follows.(1)The more the number of the board meetings that the financial expertise independent directors attended in person are,the better raises the major accounting error correction in the private listed companies.Therefore,the regulatory agency should take appropriate measures to demand the financial expertise independent directors to personally participate in the number of board meetings.When the Listed companies hire the financial expertise independent directors,they should employ the financial expertise independent directors of high level of diligence as far as possible.(2)Compared with the financial expertise independent directors who own more independent director seats,the financial expertise independent directors who own less independent director seats contribute to the major accounting error correction in the private listed companies.The more seats the financial expertise independent directors have,the busier they are,as a result of having not enough time and energy to fulfill its oversight function and improve the quality of the accounting information in the listed companies.Therefore,when the listed companies hire the financial expertise independent directors,they should employ the financial person who has less independent director seats as far as possible in order to ensure that they have sufficient time and energy to perform their duties.(3)The high compensation that the financial expertise independent directors have will be more conducive to the major accounting error correction of the private listed companies.The high level of compensation can improve the enthusiasm of the financial expertise independent directors,stimulating them to perform their duties.Therefore,in order to improve the enthusiasm of the financial expertise independent directors in corporate governance,they should be given a high level of compensation when they are employed as the independent directors in the listed companies.(4)The financial expertise independent directors of the university scholars are not beneficial to the major accounting error correction in the private listed companies.This may be due to the lack of practical experience of the financial expertise independent directors of university scholars and the heavy task of the teaching and scientific research,resulting in not having enough time and energy to effectively perform their duties.Therefore,the listed companies should drop the employment preference of the university scholars in accounting research as the independent directors.(5)The geographical proximity of the financial expertise independent directors has no significant effect on the major accounting error correction in the private listed companies.Therefore,it is not necessary to take the factor of geographical proximity into consideration when the listed companies recruit the accounting person as the independent directors.(6)Compared with the old financial expertise independent director,the young financial expertise independent director is more conducive to the major accounting error correction in private listed companies.The young financial expertise independent director with stronger physical strength,energy and learning ability,having a longer career in the future,pay more attention to their own reputation and effectively fulfill their duties.Therefore,the listed companies should hire the young financial person as independent director as far as possible.