A Study On Relationship Between Corporate Governance And Earning Management In Chinese Listed Companies

The misuse of earning management is the main problem of information disclosure in stock market. The earning management in Chinese listed companies is due to the flaw of corporate governance. So this paper will analyze theoretical on the association between the interior mechanisms of corporate governance and the earning management and carry on an empirical study by using the relevant data of listed companies in China.The paper uses the Jones model to calculate the extent of earning management and chooses ownership structure as corporate governance mechanisms to carry out regression analysis with earning management. Based on the nature of big shareholders, the paper classifies the ownership structure and finds that different trails of the interior mechanisms of corporate governance could bring different influences to earning management. Descriptive statistics show that the measurement of earning management is fewer when the nature of big shareholders is stated ownership. However, the empirical test result indicates that listed companies of stated ownership have bigger influence on management. When the nature of big shareholders is stated ownership, the greatest shareholders hold the positive "U" pattern with earning management which means that only optimum ownership concentration can reduce earning management; the proportion of tradable equity and earning management does not have remarkable correlation; the proportion of institutional shares positively correlates with earning management. When the nature of big shareholders is non-stated ownership, the correlations between explanatory variables and dependent variables tally with hypothesis, but they don't pass significance testing.Therefore, the key point to solve the problem of earning management is to perfect interior mechanisms of corporate governance and help Chinese stock market develop smoothly and healthily.