Research On The Influence Of Culture Diversity Of The Board On Earnings Management

Culture,as an informal system,is not mandatory in itself,but its influence is imperceptible.Culture affects everyone,including members of elite decision-making groups,such as corporate boards,which influence their perception and interpretation of information and connect with others.So directors are not immune to cultural biases.As the most important decision-making group in the corporate governance mechanism,the board of directors plays a decisive role in the formulation of major strategic and financial decisions,as well as the employment of senior management personnel,and bears the responsibility of the investor to supervise the management and management of the company.It is an important link between ownership and management right after the separation of two rights in the modern corporate governance mechanism.The effective functioning of the board of directors depends to a large extent on the social and psychological processes,and the culture will have an important impact on the operation of this group.At the same time,cultural diversity as one of the intrinsic types of diversity,the cultural diversity of the board of directors will play an important role in the governance of the company.Earnings management is an important financial policy of the management of the company.From the perspective of an effective contract.Moderate earnings management can make enterprises face the incompleteness and rigidity of contract flexibly,reduce the cost of contract and increase the value of enterprise.From the point of capital market,proper earnings management is a means of transmitting internal information as soon as possible and reducing information stagnation caused by communication barriers.However,excessive earnings management is a kind of serious opportunistic behavior,which will seriously damage the interests of investors and affect the healthy development of the securities market,and disrupt the normal social and economic order.Therefore,it is of great significance to study the influence of board of cultural diversity on the company' earnings management.Most of the existing researches select a single feature or multiple features at the company level,and empirically analyze its impact on the company's earnings management.This paper takes A-share listed companies in Shanghai and Shenzhen stock markets from 2008 to 2016 as the object of study.Based on the framework of Hofstede culture,this paper adopts five dimensions of cultural identity including Power Distance,Uncertainty Avoidance,Individualism,Masculinity,Long-term Orientation.These dimensions were used to construct cultural diversity of the board index of Chinese listed companies and quantitative analysis was carried out,and a dynamic and continuous comprehensive index of cultural diversity of the board was established at the corporate level.Based on the Jones model with cross-section correction,the empirical research method is used to study the influence of the comprehensive index of cultural diversity of the board on the degree of earnings management under the control of other known factors.Through the research,it is found that the comprehensive index of the cultural diversity of the board is negatively correlated with the degree of earnings management.The higher the cultural diversity,the lower the degree of earnings management.After using the real earnings management as the earnings management measurement method and the weighted least squares method for the robustness test of the heteroscedasticity process,this negative effect is still significant.This indicates that the Chinese capital market companies can reduce the company's earnings management degree by increasing the cultural diversity of the board to a certain extent.The research of this paper provides a new perspective and decision-making reference for the governance of listed companies.