Effects of Combinations Governance on Earnings Management: A Game Analysis among Financial Supervisor, Auditor and Manager
It’s a common view that earnings management from company’s managers has threatened the economic development. The datum about suspicious businesses reports mainly provided by audit institutions are the core of financial supervisor anti-earnings management system. Financial supervisor must design an effective anti-earnings management system. This paper constructs a game model among company’s managers, auditor and financial supervisor. Under different anti-earnings management policies’ combinations, we analyze the loss of social welfare in this model. Findings:(1)The policies’ combination of investigating, convicting and punishing earnings management can keep earnings management down effectively;(2)Earnings management must be cracked down;(3)For encouraging auditor of audit institutions to attend anti-earnings management activities, financial supervisor needs to reasonably compensate their anti-earnings management fix cost and enact rewards and penalties system which emphasizes penalties.
Keywordsearnings management combinations governance a game analysis
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