The Material Assets Reorganization, Institutional Investors And Earnings Management

Earnings management of listed companies has been the focus of academic research at home and abroad, and the behavior of earnings management in the process of refinancing equity is much more concerned about. Since the equity division reform, the material assets reorganization of listed companies in our. country is basically carried out through the private equity placement to buy assets in. So will the earnings management behavior exists in the process of material assets reorganization? As new shareholder groups, the institutional investors are considered to hold the stocks with advantage in information, scale and professional knowledge. They can effectively improve corporate governance mechanism, alleviate and the agency conflicts between the big shareholders and small shareholders. However, the institutional investors may be limited by specific profit model and the agency relationship, and they will participate in the governance passively and pay more attention to get capital gains.Therefore, this study analyzes the role of institutional investors in the event of material assets reorganization. Will they have effect on the earnings management behavior or just focus on the capital gains?Based on the theory of principal-agent theory and corporate governance, this study summarizes empirical studies of stock issuance, majority control, material assets reorganization and earnings management, and analyzes the features of institutional investors. Then it take the listed companies which conduct material assets reorganization in the year2008-2010years as the research sample, and analyze the influence of institutional investors on earnings management. The result can indicate:(1) Obvious negative earnings management behavior exists in the sample companies before the material assets reorganization.(2) There is a positive correlation between the proportion of majority shareholder and the degree of earnings management.(3) Institutional investors have no obvious effect on the degree of earnings management.(4) Institutional investors focus on capital gains in the event of material assets reorganization. Finally, based on research conclusion, some suggestions are given about the improvement of corporate governance mechanism and institutional investors.