The Empirical Study About Institutional Shareholders And Earnings Management In The Listed Company

The strategy "Rapidly Developing Institutional Investors" was put forward by CSRC in2001. With the rapid development of institutional investors, they have greater impact gradually, especially reflected in the influence of governance process of listed companies. The accounting information quality, an important reflection of governance effect of listed companies, is of great significance for investors to make the beneficial investment decision. At the same time, as an important manifestation of the accounting information quality, earnings management has attracted more and more attentions. As a result, the research on the influence of institutional holdings to earnings conservatism of listed companies will do a lot good to the further research on earnings management. What’s more, it will help to find the ways to improve the accounting quality of listed companies and will be conducive to the development of institutional investors.This paper employs the listed company in the A-share market from2010to2012as research sample to find out whether institutional investors can monitor the behaviors of managerial personnel actively. Firstly, this study discusses the whole investor’s effect on earnings management behavior, and then the differences in share proportion and type are considered.There are five parts in this paper. The first part of this study involves the research background, research significance, research method and research framework. The second part of the study is literature review, which summarize the related research of the relationship between institutional investors and earnings management and also corporate governance. The hypothesis based on the theoretical analysis of the relationship between institutional investors and earnings management was given out in the third part of this paper. Then, the fourth part will put out further research about the effectiveness that institutional investors restrain earnings management. Finally, the conclusion and expectation of this subject is in the fifth part of this paper.The results indicate that:(1) To some extent, the whole institutional investors play a positive role in corporate governance, and can supervise the earnings management behavior of listed companies.(2) The difference in institutional investors’share proportion can cause different effect on earnings management. Institutional investors with lower shareholding, who’s ratio is less than6%, tend to increase the degree of earnings management; with middle shareholding (more than6%but less than30%), institutional investors’effect on earnings management of the listed companies is unobvious; while with higher shareholding(more than30%), the institutional investors tend to monitor the behaviors of managerial personnel, and restrain the degree of the corporations’ earnings management.(3) The difference in institutional investors’ type can also cause different effect on degree of earnings management. Securities investment fund and QFII will be beneficial to reduce the behaviors of earnings management, while other kinds of institutional investors cannot restrain earnings management behaviors because of their immaturity.The innovation of this research is that:(1) Considering the different effect on earnings management caused by the different shareholding proportion of institutional investors,6%and30%are chosen as cut-off points.(2) This study is more specialized and targeted by classifying institutional investors into certain types in the empirical analysis, because the difference in type causes different effect on the corporate governance of the listed companies.(3) To avoid endogenous problems, this paper introduce lag variable when designing model, so that the exact relationship can be detected.