Research On The Influence Of Traffic Convenience To The Governance Effect Of Nonlocal Independent Directors With Financial Background

In 2001,China Securities Regulatory Commission issued the Guiding Opinion about Building Independent Directors in the Listed Company,which signed that independent director system was formally enforced.As an important system arrangement of corporate governance,domestic and overseas scholars have taken active research on the governance effect of nonlocal independent directors.Some scholars believe that the professionalism of independent directors is an important element that influences their governance effects.And independent directors with financial background have more professional comprehensions and judgments in financial information that the listed companies disclosed,as a result of which,they play a more significant role in earnings equality managements.The existing studies usually research independent directors' management effects from microscopic perspective,while there is seldom study analyzes from macroscopic perspective.The land of China has a vast territory,and the structure of intellectual resource is unreasonable,consequently,the listed companies in China have lots of nonlocal independent directors.Compared with local independent directors,what are the governance effect of nonlocal independent directors?In addition,with the rapid development of transportation,epically with many high-speed railways constructed and put into operation,the convenient transportation reduced the temporal distance dramatically,and the one-city effect appeared.The traffic condition is one of the most important external macro-circumstances nonlocal independent directors faced when they do their duties.What will exactly be brought to nonlocal independent directors' management effects on the convenience of traffic?In order to answer the above questions,this paper takes A-share listed companies in China between 2011 and 2015 which only have one independent director with financial background as a sample,and choses the earnings management to be the variable to test the governance effect of independent directors,combining with the principal-agent theory,asymmetric information theory,social network theory and new economic geography theory,and analyzes differences between local independent directors and nonlocal independent directors in the suppression of earnings management.On this basis,we research the influence of traffic convenience on earnings equality from the angles of nonlocal independent director with financial background.The study finds that compared with nonlocal financial independent directors,the local independent directors with financial background can inhibit accruals earnings management better,but they have no significant difference in restraining the real earnings management.The traffic convenience is in significantly negative correlation with the company's accruals earnings management of nonlocal independent directors with financial background and in insignificantly negative correlation with real earnings management.Further study shows that.the ability to suppress earnings management of local independent directors and convenient nonlocal independent directors is stronger than that of inconvenient nonlocal independent.But there is no significant difference in earnings management between convenient nonlocal independent directors and local independent directors.The findings of this paper have significant implications for Chinese government and firms in the construction of independent director system as well as the improvement of accounting earnings information quality.This study also offers insights to policy makers interested in enhancing the monitoring role of corporate boards.