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Party Membership And Earnings Management Of The Chairman Of The Company

Posted on:2021-07-31Degree:MasterType:Thesis
Country:ChinaCandidate:M T ZengFull Text:PDF
GTID:2516306302478114Subject:Master of Accounting
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The reform of China's economic system is carried out under the leadership of the Communist Party of China.Besides,in recent years,the CPC Central Committee has continuously strengthened and improved the construction of party organizations in enterprises.So in China the party will have an important influence on the behavior of enterprises,especially state-owned enterprises.Party members are the practitioners of the party's will and ideas.According to the " Upper Echelons Theory ",the personal characteristics of executives have a significant impact on corporate behavior.As a socialist country,China's communist culture more or less affects each of us,especially party members.Therefore,in China,party membership is undoubtedly an important feature of executives.Because in China,chairman of the board is in a senior leadership position,with great decision-making power,so this study takes the chairman as the object.Earnings management has always received much attention.Enterprises often use earnings management to conceal the true economic situation of the company,which may seriously mislead investors and interfere with the order of the capital market.Some earnings manipulation may even be illegal.This is clearly contrary to the ideas and will of the party and the government.Under the special national conditions of our country,the partys influence on enterprises is significant.Corporate executives who joined the Communist Party are one of the ways in which the party influences enterprises.Therefore,this article mainly discusses,in Chinese enterprises,whether the status of party member with chairman will affect the level of accrued earnings management of enterprises? And is there a difference between private and state-owned enterprises?This article first conducts a case analysis to compare the performance of accrued earnings management of four companies in the same industry from 2011 to 2015.The first group compares a private enterprise whose chairman is a party member and the one whose chairman is not a party member,and finds that the former has a lower degree of accrued earnings management.The second group compares a state-owned enterprise whose chairman is a party member and the one whose chairman is not a party member,and finds that the former has a lower degree of accrued earnings management too.The last group compares a private enterprise with a state-owned one and finds that although the chairman of both companies joined the Communist Party,the latters accrued earnings management was generally lower.In order to explain this phenomenon,on the basis of case analysis,this paper conducts theoretical analysis,proposes a hypothesis,designs an empirical model,and the hypothesis is verified.The choice of human behavior is a trade-off between benefits and costs,which includes material and spiritual aspects.On the material level,party members,especially party member executives of state-owned enterprises,will face this huge political cost once they are punished.From a spiritual level,party members have long studied communist culture,so their behavior will more or less reflect the party's will and propositions.Besides,party members know more about the spirit of the party and related regulations formulated by the party and the government than non-party members,so their behavior is more likely to be restrained.In state-owned enterprises,party organizations play an important role.The Nineteenth National Congress of the Party clearly pointed out that the Party Committee is in a leading position among state-owned enterprises.And there are many policies in these enterprises that effectively restrict corporate executives and corporate behavior.In addition,executives in state-owned enterprises have the dual identities of professional managers and government officials,so they have political considerations.Therefore,in state-owned enterprises,the behavior of party members is more constrained.But unlike state-owned enterprises,party building of private enterprises is more aimed at strengthening ties with the government and increasing political capital although party building in these companies has been continuously improved in recent years.And they are less subject to political constraints and their main pursuit is economic efficiency.Therefore,the role of party organizations in private enterprises is far less than that of state-owned enterprises.Based on the above,the hypothesis of this article is that companies whose chairman is a party member will have a lower degree of accrued earnings management.Moreover,compared with private enterprises,in state-owned enterprises,the suppression effect will be more significant.The results of the study also confirmed the hypothesis.In addition,this article further investigates the impact of strict capital market regulation in 2017 on this suppression effect.There are two possibilities for the impact of this policy.On the one hand,stricter supervision leads to greater risks of accrued earnings management,and party members' behavior is subject to more pressure than non-party members.At this time,chairmen who are the party member is more likely to abandon earnings management or switch from accrued earnings management to real earnings management which is more secret.Based on this,we expect that the depression effect will become stronger.On the other hand,since the accrued earnings management of companies with chairmen who are the party member is already at a relatively low level,the impact of the policy on these companies is limited.In this case,we expect that the suppression effect will weaken.The results of the study confirm the second hypothesis.
Keywords/Search Tags:Upper Echelons Theory, CPC member, Earning management, State-owned enterprise, Private enterprise
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