State-Owned Enterprise Executives Change And Earnings Management

Executives change and earnings management are important aspects of corporate governance research.Earnings management is an important behavior of senior executives.As an executive of a state-owned company,it has the status of "quasi-official" and "professional agent".Political promotion is an extremely important goal for executives of state-owned enterprises.In particular,with the introduction of a series of “Limited Pay Orders”,promotion,especially political advancement,has become an important incentive for state-owned company executives.Different changes can have different effects on executives' behavior.At the same time,different earnings management methods have different impacts on companies.Existing literature finds that there is a certain degree of correlation between executive changes and earnings management.However,the existing literature does not distinguish the nature of senior management changes.There are few studies on promotion and demotion and earnings management,not to mention the influence of changes in executives who take political careers on corporate earnings management.This paper starts from the incentive theory,information asymmetry theory,psychological contract theory,and reputation theory,and selects Ashare listed state-owned enterprises with changes in senior management from 2006 to 2016 to be able to trace the nature of the change.And this paper classifies changes as promotion,leveling,and demotion,and further classify promotion as political promotion and non-political promotion.This paper selects the accrued earnings management,real earnings management,and non-recurring profit and loss as representatives,and conducts empirical tests between different position changes and earnings management.The study found that:(1)The level of positive earnings management was generally increased in the year before the change in the senior management of SOEs,but the degree of demotion was not significantly higher than promotion;(2)The overall positive and negative earnings management levels have increased in the year of the change in the senior management of SOEs,and the positive surplus of demotion has become higher.(3)The political promotion of senior SOE executives has reduced the degree of negative real earnings management in the year of change,but the relationship is weak.