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Impact Of External Governance Environment And Ultimate Controller Characteristic On Earnings Management Of The Listed Companies

Posted on:2016-03-28Degree:DoctorType:Dissertation
Country:ChinaCandidate:K J ChenFull Text:PDF
GTID:1109330461477697Subject:Accounting
Abstract/Summary:PDF Full Text Request
As one of important research subjects in corporate finance and governance, earnings management is always a hot topic in the theory and practice fields. With the continuous development of Law and Finance, massive empirical evidences demonstrate that external governance environment can influent enterprise management decision significantly. China is an emerging market with transition, resulting in listed corporations with various ultimate controllers existing in capital market which is one of major features of Chinese market economy. This special system background impacts market performance and behavior guidance of enterprises. Seek distribution characteristics of earnings management in Chinese listed corporations, and investigate the influence of external governance environment on accrual-based earnings management and real earnings management, in order to explore the system root of strategy changing of earnings management. After that, discus the diversities of the impact of external governance environment to earnings management under various ultimate controllers and administrative ranks.There are seven chapters in all. The first chapter shows the research background and significance, defines major concepts, and describes technology roadmap. In the second chapter, hackle theoretical basis and influencing factors and writes a literature review. Depicting the distribution characteristic maps of accrual-based and real earnings management of listed corporations in different areas, the next chapter analyzes the regional diversities and spatial agglomeration of earnings management. In the fourth part, combining with the influence of external governance environment on accrual-based and real earnings management, investigate the institutional root-cause of enterprise’s earnings management strategy change. The fifth chapter analysis the impact of characteristics and administrative ranks of the ultimate controllers to earnings management.Based on the view of the diversified ultimate controller, the sixth chapter explores the various impacts of external governance environment on earnings management depending on the characteristics and administrative ranks of the ultimate controllers. A summary contains major research conclusions, innovative points and research prospects at the end. The main research achievements of this paper are as follows:(1)The regional distribution characteristics of earnings management can be followed by regulation in China. Earnings management between three regions, namely the east, the middle and the west are significantly different. It also has a strong spatial autocorrelation and a significant cluster.First of all, by drawing the regional distribution characteristics of earnings management, we find that companies in the east of China have the lowest degree of accrual-based earnings management and the degree of accrual-based earnings management in the west is the highest. While, the distribution characteristics of real earnings management is exactly on the contrary. Companies in the east of China have the highest degree of real earnings management and the degree of real earnings management in the west is the lowest. Secondly, this paper uses non-parametric test to conduct variance analysis between groups. The result reveals that earnings management between three regions, namely the east, the middle and the west are significantly different. Finally, this article utilizes spatial autocorrelation test to analyze the spatial characteristics of earnings management distribution. It states that earnings management has a strong spatial autocorrelation in most years in China and the cluster is significant.(2)Good external governance environment can effectively reduce the degree of accrual-based earnings management, but it induces more real earnings management. With the constant improvement of external governance environment in China, listed companies intend to use real earnings management more frequently but less accrual-based earnings management.This paper uses system GMM estimation and investigates how external governance environment affects accrual-based earnings management and real earnings management, empirically examines the institution source of strategy change of earnings management in Chinese public companies. The research discovers that external governance environment has a significantly negative relation with accrual-based earnings management but it is significantly positive with real earnings management. With the constant improvement of external governance environment, the strategies of earnings management become wiser. It gradually changes from traditional accrual-based earnings management which can be easily discovered to unobservable real earnings management.(3)The characteristics of the ultimate controller can significantly affect accrual-based earning management and real earning management; However, administrative ranks of ultimate controller can only affect accrual-based earnings management, but cannot influence real earning management.From two aspects of characteristics and administrative ranks of ultimate controller, this paper examines the influence of ultimate controller on accrual-based earning management and real earning management with the use of system GMM estimation. The research shows:firstly the state-controlled listed companies have a lower level of accrual-based earning management and real earning management compared with the non-state-controlled ones; Secondly, the listed companies under the control of central government have a lower level of accrual-based earning management in comparison with the ones under the control of regional government; finally, the administrative ranks of ultimate controller do not have a significant effect upon real earning management of listed companies.(4)The governance effect of earnings management which is brought by external governance environment is influenced by ultimate controller characteristic. Compared to non-government controlled companies, external governance environment has a stronger force to government controlled companies in constraining accrual-based earnings management and real earnings management. Compared to local government controlled companies, external governance environment has a stronger force to central government controlled companies in constraining accrual-based earnings management, but has little function in constraining real earnings management.Through empirical test, this research tests the influence of ultimate controller’s characteristic and governance environment upon earnings management. We find that on one hand, compared to non-government controlled companies, external governance environment has a stronger force to government controlled companies in constraining earnings management. On the other hand, compared to local government controlled companies, external governance environment has a stronger force to central government controlled companies in constraining accrual-based earnings management, but has little function in constraining real earnings management.
Keywords/Search Tags:External Governance Environment, Accrual-based Earning Management, Real Earning Management, Ultimate Controller
PDF Full Text Request
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