Research On The Internal Control Defects,internal Governance And Earnings Management

Earnings information is an important part of accounting information.High quality earnings information should objectively reflect the operating results of enterprises,truly reflect the value of the company,and provide services for relevant information users in economic decision-making.However,in order to maximize their own interests,the management may manipulate income information,beautify the data of financial statements and carry out excessive earnings management.This behavior will not only reduce the quality of accounting information and mislead the economic decisions of information users,but also be detrimental to the long-term development of the company itself and the normal and healthy operation of the capital market.It can be seen that it is of great significance to study the factors affecting earnings management and provide a way for listed companies to reduce excessive earnings.Enterprise earnings management is affected by industry characteristics,enterprise characteristics,enterprise governance level,external audit and other factors,in which corporate governance plays an important role.Therefore,from the perspective of corporate governance,this paper studies the impact of different degrees of internal control defects on accrued earnings management and real earnings management of listed companies,and on this basis,adds the factor of internal governance of senior management team to verify whether it has a regulatory effect on them.Firstly,this paper combs the literature related to internal control defects,earnings management and internal governance of senior management team,and then puts forward the relevant assumptions of this paper by using the principal-agent theory and information asymmetry theory and combined with the current situation of Listed Companies in China.On this basis,5899 data of Shanghai and Shenzhen A-share listed companies from 2012 to 2020 are selected as research samples to build relevant models for multiple regression test,endogenous test and robustness test.Then in the further research,the sample companies are divided into state-owned enterprises and non-state-owned enterprises according to the nature of property rights.It is found that the degree of internal control defects of listed companies is significantly positively correlated with accrued earnings management and real earnings management,that is,the more serious the internal control defects are,the higher the degree of the two kinds of earnings management is;The internal governance of senior management team will weaken the impact of internal control defects on real earnings management.Further research found that the nature of property rights will not have an impact on the relationship between the degree of internal control defects and earnings management,but will have an impact on the internal governance of the senior management team.In non-state-owned enterprises,the internal governance of the senior management team plays a regulatory role in the relationship between the degree of internal control defects and real earnings management.This paper reveals how internal control defects affect the earnings management so as to support the way to reduce the level of earnings management.It also helps information users to enhance their understanding of the relationship between them and pay more attention to the information disclosure of internal control defects of listed companies,so as to better serve their own economic decision-making.At the same time,it also provides evidence support for the regulatory requirements that regulators force listed companies to disclose defects.This paper studies the "bottom-up" supervision and restriction of key subordinates on the CEO in the senior management team,extends the new subject of corporate governance,and expands the previous research idea of taking the senior management team as a whole;And put the defects of internal control,earnings management and internal governance of senior management team into a research framework,which makes up for the shortcomings of the existing research literature in this regard.It verifies the existence of the "bottom-up" governance effect of the senior management team,and provides a new theoretical basis and practical path for enterprises to strengthen internal governance and reduce earnings management.