Case Study On Earnings Management Behavior Under Equity Pledge Of H Company’s Major Shareholders

Compared with other mature financial markets,the phenomenon of "dominance of one share" of listed companies is more common in China’s financial market.Major shareholders hold the control of the company,and the development of enterprises is decided by one person.For private enterprises,especially logistics enterprises,the difficulty of financing has always restricted their development.In addition,in the context of the new monetary policy proposed by the central bank,the relevant regulatory requirements of financial institutions have become more stringent,exacerbating the tightening of financing channels.Therefore,equity pledge is favored because of its convenient and fast advantages.However,the frequent occurrence of equity pledge in the market can not be ignored.Once the stock price of listed companies continues to fall,the major shareholders may face the risk of "abdication",which will have a series of adverse effects on the operation and development of the whole company.In order to avoid the risk of "abdication" caused by equity pledge,the major shareholders’ meeting chose to beautify the company’s financial statements through various earnings management means and steadily increase the company’s share price.However,excessive earnings management will not only damage the long-term benefits of enterprises,but also promote major shareholders to occupy the company and other shareholders for their own interests.Therefore,the research on earnings management behavior under the equity pledge of major shareholders has certain theoretical and practical significance both from the perspective of enterprises and from the perspective of market investors.At this stage,most of the research on earnings management behavior under the equity pledge of major shareholders is empirical research,and there is less analysis on specific case companies.However,as a common means of profit manipulation,earnings management often occurs in the daily business activities of enterprises,and taking specific companies as the analysis object has more practical significance.Therefore,this thesis selects H company,which is representative in the logistics industry and has a high equity pledge rate,as the case object,and analyzes H company on the basis of reviewing the existing literature,combined with case analysis and comparative analysis.Firstly,it briefly introduces H company and discusses the motivation and behavior characteristics of its major shareholders’ equity pledge.Secondly,the fluctuation of stock price and the change of excess cumulative return before and after the announcement of equity pledge of major shareholders are calculated,which proves that the major shareholders of H company will carry out earnings management due to the poor response of equity pledge market.The cross-sectional modified Jones model and Roychowdhury model are selected to measure the accrued earnings management level and real earnings management level of H company,indicating that H company has earnings management behavior during the period of equity pledge of major shareholders.Thirdly,select the financial statement data and relevant announcements of H company from 2012 to 2020 to analyze the specific means of earnings management of H company.Finally,combined with the changes of relevant financial indicators,this thesis comprehensively analyzes the economic consequences of earnings management under the equity pledge of major shareholders.The results show that:(1)the equity pledge of major shareholders of H company gives birth to its market value management motivation,which induces earnings management behavior;(2)H company’s earnings manipulation means are diversified,such as adjusting accounts receivable,through government subsidies,using related party transactions,transferring equity investment,etc;(3)After the equity pledge of the major shareholders of H company,the way of earnings management gradually turns to the real earnings management with stronger concealment;(4)Earnings management behavior damages the long-term benefits of H company and the due rights and interests of other shareholders.Through the case analysis of earnings management behavior under the equity pledge of major shareholders of H company,this thesis puts forward relevant suggestions from the internal and external perspectives of the company.In order to improve the supervision of the listed company’s earnings pledge during the audit period,it is also necessary to strengthen the supervision of the listed company’s large shareholders and the effective management of the listed company’s earnings pledge during the audit period.In terms of internal control,enterprises need to build a scientific and reasonable ownership structure to improve the level of governance.In addition,enterprises should also reduce the equity pledge rate of major shareholders to avoid the adverse impact of the aggravation of the separation of two rights on the company.