Research on the Relationship between Corporate Governance Mechanisms and Earnings Management based on Chinese Listed Firms

This paper empirically studies the relationship among concentration ownership, board of directors and earnings management of public listed firms in China. We use annual data for 1342 companies listed on China's two exchanges in 2005. We find that, on average, earnings management is negatively effected by concentration ownership, whether the firm is state-controlled, board size, proportion of independent directors and executive compensation, while it is positively influenced by the duality of CEO. Therefore, such a significant relationship is good to discourage earnings management and improve the Chinese capital market developing healthily, stably and harmoniously.