| The quality and transparency of financial information disclosure will not only affect the evaluation of the enterprise operating performance and judgment of the investment and financing decisions from capital market participants,but also relate the interests and potential risks with the enterprise itself.Therefore,national regulators have further clearly established the disclosure requirements of listed companies and strengthen the supervision of them.While the content of the information disclosure of listed companies in our country is more specific than before,and the quality is also on the increase year by year,but the circumstances that accounting discrepancies and disclosure violations are not uncommon nowadays,which not only seriously affect the trust of investors,creditors and other social publics,but impair the healthy operation and steady development of capital market as well.Up to the present,the domestic and foreign scholars' studies about the economic consequences of financial irregularities mainly focus on stock price loss,reputation loss,information disclosure,internal control quality,debt financing,audit opinions,audit fees and other aspects,and the discussion on the principal managers in charge of violations focuses on the CEO or the chairman,while there is little discussion related to CFO.Given that the status and power of CFO in the company are increasingly paid more attention,the research on CFO will be of great significance to corporate governance.Secondly,existing literatures focus more on the change of CEO position or the change of executive compensation,and there are few literatures comparing the severity of punishment of CEO and CFO after the financial irregularities.Finally,previous literatures generally studied the correlation between corporate irregularities,governance factors and executive position change,salary change in an isolated way,and paid little attention to the influence of control power incentives that executives have been awarded on executive change and salary punishment under the background of financial irregularities.Accordingly,this paper will discuss the market punishment of CEO and CFO after the exposure of financial irregularities,and consider the influence of control right motivation will exert on the punishment effect.Based on the information asymmetry theory,principal-agent theory,reputation theory and incentive theory,combined with the review and summarization of the literatures about the economic consequences of financial irregularities,management turnover,executive compensation and control power incentives,this paper conducts a study and discuss on the relation between financial irregularities and mandatory turnovers and compensation changes of CEO and CFO.In terms of data processing,this paper chooses A-share listed companies between 2010 and 2017.After screening and collecting the required financial irregularities samples,some indicators are used to pair the controlled group including annual,industry,asset scale and operating performance for each violation sample.Through using descriptive statistics,correlation analysis and multiple logistic regression,the paper checks and analyze the four hypotheses proposed in the article.Finally,combined with the method of propensity score matching(PSM)and some substitute variable such as operating performance and control power incentives,several methods are employed to perform robustness tests.The findings are as follows:(1)Compared with non-financial offending companies,CEO and CFO of financial offending companies are more likely to face mandatory turnover,and the severity of punishment is significantly positively correlated with the probability of CEO and CFO turnover;(2)Under the circumstances that CEO and CFO are not dismissed,there is a significant negative correlation between the company's financial irregularities and CEO and CFO's remuneration.The more serious the punishment is,the higher the CEO and CFO's remuneration will decline.(3)The control power that CEO and CFO owned in the company can build a trench effect for them,the CEO and CFO who have strong control power can protect themselves from punishment after the exposure of financial violation,which is specific in weakening the possibility of forced replacement and compensation punishment;(4)By comparing the punishment effect on CEO and CFO in the case of financial violation,the results show that the CEO of a company with financial violation has a higher probability of forced turnover than CFO,and the salary of the CEO without turnover has a lower decline level than CFO.This paper explores the forced turnover and salary penalty of CEO and CFO after the exposure of financial irregularities,which enriches the existing studies related to the economic consequences of financial irregularities to some extent.Besides,the impact of the roles of the CEO and CFO in the violation events on their ultimate responsibility for the irregularities are compared to analyze who has been really punished.At the same time,this paper makes allowance for the potential negative effect of control power incentive from management under the background of punishment for violation.Based on above,the design of the paper pose a new attempt to analyze the supervision departments which play an important role in avoiding moral hazard of company executives and reducing the agency cost.The findings concluded provide reference value for improving the system of appointment or dismissal of senior executives,standardizing corporate governance mechanism and strengthening market supervision to a certain degree. |
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