Empirical Research On The Impact Of Ultimate Ownership Structure On Earnings Persistence

The split share structure reform is undoubtedly a milestone in China’s capital market development. Split share structure reform changed the ownership structure of listed companies. What impact will significant changes in the shareholding structure have on decision-making power configuration and behavior of listed companies? What impact will changes of control have on the company’s earnings persistence? For the status of the ownership structure of listed companies in China, is there the optimal ownership structure? Which is a more accurate description,"dominance" or "equity checks and balances"? The main purpose of this paper is to answer these questions.The new accounting standards (2007):In order to meet needs of information users, the enterprise should provide the indicators of accounting earnings. Accounting earnings determine the profitability of the enterprises, playing the role of resource allocation in the capital market, but it is based on this premise:the accounting earnings must be of high quality, which require the accounting earnings are persistent.Combined with China’s unique national conditions. This paper explores the impact of ultimate ownership structure on earnings persistence in the ultimate control over perspective, in order to more deeply understand and explain the real reason for the earnings persistence differences, to increase the earnings quality in China.Considering the consistency of the accounting standards. This thesis selects the listed companies data in2007-2010A-share market for the sample, using the empirical research method, excluding the financial industry and companies that are loss or exist missing values. The thesis divided the total profits of the period t into operating profit and non-operating profit, cash flow components and accruals components, based on the earnings persistence linear mode Et+1=β0+βEt+εt+ meanwhile, using the Jones model to divide accruals components into the normal accrual and abnormal accrual components. It uses grouped regression analysis method to examine earnings persistence of all sample companies. Meanwhile, the article uses the proportion of operating profit in total profit in the2010sample companies as proxy variables of earnings persistence, uses quantitative equity indicators as explanatory variables and selects the appropriate control variables in the regression analysis, as a the robustness test of grouped regression analysis method to further study the impact of ownership structure on earnings persistence. According to the regression results, the paper concludes that:higher stake the ultimate controlling shareholder holds, lower the earnings persistence is; when the ultimate controlling shareholder is state-owned shares, the lower earnings persistence is; higher the ultimate equity balance is. higher the earnings persistence is. Compared with the ultimate controlling shareholders are non-state shareholders, when the ultimate controlling shareholders are state-owned, reverse impact on earnings persistence that the ultimate controlling shareholder ownership of listed companies has are greater.while the balance degree of the listed companies has less positive impact. on earnings persistence. The assumption has been verified. This paper consists of the following seven sections:The first part is the introduction. It overviews the background of this study the significance of research methods first,then it overviews the research contents, innovation and shortage of this paper.The second part is the literature review. It involves the research results of earnings Persistence and ownership structure influence on the earnings persistence. I believe that the earnings persistence research system is complicated, and different scholars described Earnings Persistence definitions and measurement methods from different point of view, but less involved in the study from the point of view of the constraints, such as ownership structure, corporate governance structure. Standing in the corporate governance point of view. I believe that the persistence of the earnings can be enhanced from the perspective of ownership.The third part is the definition. It involves the definition of earnings persistence, the ultimate ownership structure and its impact on earnings persistence.The fourth, fifth part mainly describes the study design and the empirical results of the research. This is the focus of the full paper. This section will introduce the research hypotheses, research model, the required data sources, the process of sample selection, the descriptive characteristics of the sample, the analysis, and detailed lists of the empirical research results.The sixth part is the robustness test. In order to make up the empirical variables not quantified and not considering the cross in the previous chapter, this part selects quantified equity index as the explanatory variables and the appropriate control variables in the regression analysis, using operating profit to total profit variables in the2010sample companies.The seventh part is the conclusions and recommendations. This section will summarize the main findings of the paper. I proposed recommendations from the point of view of ownership structure to increase China’s persistent persistence.