Managerial Discretion and Corporate Financial Violations

Abstract

Based on the sample of China’s A-share listed companies from 2008 to 2017, this paper researches the impact of managerial discretion on the corporate financial violations. The findings are shown that the greater managerial discretion, the more times of corporate financial violations. The analysis and test of mechanisms are shown that managerial discretion aggravates corporate financial violations by increasing the agency costs of management and the degree of information asymmetry between insiders and outsiders. The analysis and test of action environment are shown that in the environment of managerial overconfidence and strong regional risk preference, managerial discretion has a greater impact on corporate financial violations. The analysis and test of economic consequences are shown that in a corporate with greater managerial discretion, financial violations exert greater effect on the costs of debt financing and the risk of stock price crash. This study analyzes and validates the impact of managerial discretion on the quality of corporate decision-making behaviors, which is of great significance to China’s capital market supervision.