Empirical Research On The Correlation Of Institutional Investors And Listed Corporates’ Earnings Quality

Since the reform of non-tradable shares in2006, institutional investors achieved quickly development and became one of the most important participants in the capital market with the help of our government. The relationship between institutional investors and the quality of earnings is a logical combination of the outsider investors, capital market and company governance, the meanings of this paper is as follows:first, to seek the potential methods to improve earnings quality from the perspective of company governance; second, to enhance our knowledge about the extent of which institutional investors involved in company governance, then give reference to our government about making further decisions to promote the development of institutional investors.This paper take earnings quality as the research object, which aroused general interest among corporate governance.The research analyzed the relationship between institutional investors and the quality of earnings both in theoretical studies and empirical studies.In the theoretical part, the author reviewed relative articles across the world, then introduce some fundamental theories by means of normative research, analyzed the mechanism of how the institutional investors affect companies’earnings quality. And in the empirical part, the author chose the factor analysis method to build a model of earnings quality evaluation, and take earnings quality scores as dependents, at the same time take the sum of portion, number and the holding shares of different type institutional investors as independents, then observe the relationship between these two kind of variables applying the multiple linear regression model.The main conclusions are as follows:(1) Institutional investors holding stock shares are positive to earnings quality of listed companies, and improving the portion or number of institutional investors in a company are helpful to enhance the quality of earnings. The institutional investors in our country’capital market can play a role of shareholder activism and supervise managers in generally.(2) In our domestic capital market, the institutional investors are different in the number of stock shares,the investment motivation and so on, then cause different effects on their influence to the earnings quality and corporate governance.