Empirical Study On Correlation Between Ownership Structure And Earnings Management Of Chinese Listed Corporation

With the continuous development of China’s capital market, the utilization and attention of the financial reports of the listed companies increase, and the importance of accounting earnings information which will affect the behavior of stock market investors and other stakeholders of listed companies is more and more prominent. To public disclosure of accounting information of listed companies in China, however, there is a lack of authenticity, reliability and integrity by varying degrees. The separation of controlling and operating cause the principal-agent problems and information asymmetry. In order to achieve the goal of their own interests, agents may be possible to use their dominant position in the corporate governance, earnings management, which may be damage to the listed companies as well as the interests of stakeholders. The presence of earnings management is caused by both internal governance mechanisms defects and the lack of external supervision and management. The shareholding structure of listed companies is an important aspect of governance mechanisms. Studying the relationship of Ownership Structure and Earnings Management of Chinese listed companies has important theoretical and practical significance to improve their governance mechanisms and to reduce the extent of earnings management.Firstly Ownership Structure and earnings management relations in the research literature have been sort out. And then definitions are identified, according to the research needs of Ownership Structure and Earnings Management, and the theoretical basis of earnings management from the principal-agent theory and information asymmetry theory angle is expounded. Then, basing on the overall situation for all of2011listed companies in Shanghai and Shenzhen, we analysis the status quo of the shareholding structure of China’s listed companies and the motive and the means of earnings management. On this basis, the paper selects the2011Shanghai and Shenzhen A-share listed companies as the study samples, using the modified Jones model calculated the absolute value of discretionary accruals as the extent of earnings management proxy variables, and use the single-sample T-test, to verify whether China’s A-share listed companies have earnings management. Then through a multiple regression model to verify the relationship of the extent of earnings management and ownership concentration, equity balance degree, the proportion of state-owned shares, equity liquidity, management and institutional investors’shareholding ratio. The first part is the introduction, it describes the background and significance of this study, and based on this topic, makes an overall review and comment on the research situation at home and abroad, and combined with the previous research results it elaborates this article research mentality and the method, finally it puts forward the possible innovation points and deficiencies.The second part is the summary of the theory, firstly it introduces the related concept of ownership structure and earnings management, and combining with the research need, the ownership structure and earnings management is defined, and then it illustrates the theoretical basis of earnings management.The third part is the present situation analysis, and using Excel and SPSS17.0statistical software for all listing Corporation in China in2011the overall analysis, it describes the characteristics of ownership structure of China’s listing Corporation and listing Corporation in China, the implementation of the motives and means of earnings management.The fourth part is empirical research, firstly, using SPSS statistical software, according to the model, it proves China’s A shares of listing Corporation existence of earnings management, and then tests the impact of ownership structure on the extent of earnings management, and the results are summarized and analyzed.The fifth part is the conclusion. It summarizes the general situation of the research. On this basis, it puts forward several suggestions to improve the earnings management behavior of the listing Corporation in China’s proposal, and the prospect of the further research direction.The empirical results show that:(1) Shares of listed companies are more concentrated in the largest shareholder, the more obvious the extent of earnings management is.(2) As the largest shareholder of the listed companies in China has the absolute advantage compared to the other shareholders, the other major shareholders are difficult to form effective checks and balances of the largest shareholder, then, large shareholders compromise with each other. The second to the fifth largest shareholding ratio is positively correlated to the extent of earnings management.(3) Causing by the absence of state-owned shares, the stake of the state-owned shares is positively correlated with the extent of earnings management.(4) The higher the proportion of the outstanding shares, the more it helps to reduce the extent of earnings management.(5) Putting the implementation of equity incentive to the management, can significantly reduce the extent of earnings management of listed companies.(6) There is a significantly negative correlation between the proportions of institutional investors holding and the extent of earnings management. Finally, according to the conclusions of this study, the paper puts forward several corresponding policy recommendations.