Restructuring And Earnings Quality-an Empirical Study Based On Tunneling And Propping Perspective

With the mushrooming of assets restructurings in the capital market,more and more studies focus on the motivation and performance of the reorganization home and abroad.As the researches of restructuring motivation began earlier,so many mature theories and conclusions have been formed in west countries,such as synergy theory, principal-agent theory and so on.However,many domestic scholars found that due to historical reasons,as well as institutional and legal differences,many western theories failed to explain assets restructuring actions of listed companies in China,which drives us to explore the internal motivation in assets reorganizations.Previous studies have found that listed companies in China had a high degree of ownership concentration and single big shareholder is relatively general.In the absence of appropriate supervision and constraints,assets restructurings become a very easy kind of capital operation actions for controlling shareholders to meet certain requirements or to achieve a special financial purpose.Summarized previous researches,this paper finds that the reorganization actions of China mainly have the following characteristics:First,most of the reorganizations in China take place between related enterprises and they are designed to tunnel the listed companies instead of improving corporate performance;Second,a considerable number of assets restructuring is centered on"Cell resources,Allotment,Further issue"purposes and so on,that means controlling shareholders will prop listed companies in order to meet the financing requirements or to keep"Shell Resources"; Third,part of the assets restructurings aims to reduce transaction costs and optimize the allocation of resources in order to achieve synergistic effect.There is no doubt that the former two types of assets reorganizations are only kinds of opportunistic reorganizations,they can't improve the performance of listed companies substantially,but these factitious operation will bring a certain negative impact on the earnings quality,and the quality of earnings is directly related to the vital interests of the medium and small shareholders,creditors and other stakeholders. Thus,there is great significance to explore the relationship between earnings quality and assets restructurings of different motivations.This paper chooses the assets reorganizations of Chinese listed companies between 2004 and 2005 as samples,and then divides the samples into Tunneling Type Restructuring,Opportunistic-propping Type Restructuring and Substantive-propping Type Restructuring in accordance with the different motivations so as to study the relationships between earnings quality and restructurings of three different motivations.The results show that Tunneling and Opportunistic Restructuring reduce the earnings quality significantly;the type of Substantive-propping Restructurings improves the earnings quality significantly.