"Communist Party Member" Status Of Enterprise Executives And Corporate Earnings Management

The reform of our country’s economic system is carried out under the leadership of the party.In recent years,the Central Committee of the Communist Party of China has continuously strengthened and improved the construction of enterprise party organizations.As the basic unit of the party organization,party members are always influenced by the party organization in their words and deeds.It is generally believed that earnings management will change the judgments and decisions of stakeholders who measure the company’s operating performance based on accounting statements and will harm the economic market.Chairman,CEO and CFO are the core members of the top management team,and their personal characteristics will have an important impact on corporate behavior.So,can the party membership of executives inhibit corporate earnings management?In particular,the construction of party organizations in private enterprises is mainly spontaneous,while the construction of party organizations in state-owned enterprises is more complete due to the influence of policies such as "cross-serving".So,is the inhibitory effect of executive party membership on earnings management established in both stateowned and non-state-owned enterprises?Based on the principal-agent theory,the informal system theory,and the high-level team theory,and combined with the current status of earnings management research,this paper proposes a hypothesis that corporate executives with party membership can effectively inhibit corporate earnings management behavior.This paper takes the listed companies in our country’s Shanghai and Shenzhen A-share markets from 2015 to 2020 as the research object,based on the perspective of political culture with Chinese characteristics,to study the impact of corporate executives’ "Communist Party Members" status on corporate earnings management.The empirical results show that:First,compared with companies without corporate executives with "Communist Party Members" status,companies with corporate executives with "Communist Party Members" status have lower levels of earnings management.Second,the nature of property rights affects executives.Compared with private enterprises,party members and executives of state-owned enterprises can significantly reduce the level of earnings management.Third,further research found that the party membership of executives has a more significant inhibitory effect on upward earnings management than downward earnings management.Finally,the party membership of executives in regions with a lower degree of marketization can play a greater inhibitory role.Research shows that corporate executives with the status of "Communist Party Members",as a special group in the carrier of inheriting the communist culture,can effectively perform their supervisory duties on the earnings management of listed companies,and play the role of "vanguard and model".To a certain extent,identity acts as a substitute for formal institutions.This paper includes the following six parts:The first part is the introduction,which mainly introduces the research background and research significance of this paper,and expounds the research status of domestic and foreign executives’characteristics and earnings management.The second part defines the concepts of state-owned enterprises,private enterprises,executive political identity,and earnings management.It expounds on principal-agent theory,high-level team theory,and informal system theory.According to the existing theories,the third part analyzes and puts forward the hypothesis of this research.The fourth part refers to existing research to build a model and define relevant variables.The fifth part,based on the established model,firstly conducts regression analysis and classifies according to the nature of equity,to study the difference between party membership’s impact on earnings management in state-owned enterprises and private enterprises.Then conducts a robustness test to verify the hypothesis fully.And then compare the degree of influence of executive party members on the upward and downward of earnings management.Finally,study the influence of the degree of marketization on the relationship between executive party members and earnings management.The last part summarizes the findings and reviews the inadequacies in the study.In the research process,this paper puts forward two innovative viewpoints:First,the innovation of the research perspective.Existing research on political influence focuses on the macro perspective,and few works of literature start from the micro-individual of the party organization.Based on the theory of informal system and the high-level team theory,based on the perspective of political culture with Chinese characteristics,and based on the research idea of "culture-individualcompany earnings management",this paper analyzes and studies from the carrier of communist culture-Communist Party members.The influence of Communist Party membership of listed company executives on corporate earnings management expands the characteristic indicators of executive background.Second,this study deepens the research on the sinicization of "high-level echelon theory".Existing researches on executives mostly focus on the characteristics of professional and occupational background,reputation and relationship network,and there are few studies on the relationship between executives’ political background and corporate earnings management.This paper uses the "Communist Party Member" status of executives as an explanatory variable,also controls the characteristics of gender,age,education,and professional title,and studies the impact of the "Communist Party Member" status of executives on the company’s earnings management,enriching the theory of high-level teams.The relevant research on localization has further expanded the theoretical research on the influence of executive party membership and party organization participation in governance on corporate behavior.