The Relationship Between Different Types Of Investigators And Earnings Management In Private Equity Placement Of Chinese Listed Company

The behavior of earnings management in the process of equity offering by listed companies has been a hot issue in academic circles. The situation of "only one big share" leading to a strong preference for rights offering and seasoned equity offering by listed company. Since2006,private equity placement is more and more popular and becoming the main choice of equity refinancing. It is a pity that the full circulation is not accompanied by a corresponding sound corporate governance and small shareholders right protection system. As a result, Private equity placement may become the tool of large shareholders to carry on earnings management and make controlling private profits. This paper aims to explore the relationship between large shareholders controlling and earnings management by analyzing discretional accruals in the process of Private equity placement.This paper gives a brief introduction on Private equity placement in China, analyses motivation and influences of large shareholders earnings management and draw the conclusion that earnings management exists in Private equity placement in China with the purpose of obtain private benefit or realizing the promises to institutional investors. Firstly, this paper takes listed companies which have implemented private equity placement in2006and2007as a sample and divide it into three sub-groups according to investor identity. Then we have an empirical research on relationship between investor identity and earnings management in private equity placement by analyzing the differences of discretional accruals of different investors and test it by an regression analysis. Finally, we come to conclusion that the earnings management in private equity placement is concerned with investor identity. Before conducting private equity placement, listed companies carry on negative earnings management when the investors are large shareholders, otherwise, they conduct positive earnings management. At the end of Lock-up period, there is no remarkable proof to conduct earnings management to the large shareholders. At the same time, notable evidence are found that when company refinancing to institutional investors, they conduct positive earnings management. We still found that the higher share proportion of large shareholders, the higher degree of earnings management. According to the above conclusion, the last part of this paper puts forward some enlightenment and suggestions.This paper is helpful to enhance the understanding of equity refinancing. It is the innovative and significant to study the whole Private equity placement process from the beginning to the unlock period. This paper provides a theoretical basis for strengthening supervision and perfecting the corporate governance system.