Research On Management Shareholding, Institutional Investors And Financial Restatements For Listed Companies

After developing for more than twenty years, Chinese securities market initially forms a relatively perfect standard system and builds a stable and orderly market environment. Investors are gradually aware that valued listed companies have a higher level of long-term profitability and investment value than those valued stocks. Pursuing the long-run investment income leads investors to extremely focus on the management of those potential valued listed companies, causing corporate governance being a hot issue in academic community. Having Conducted a large number of theoretical and empirical researches, scholars come up with a series of corporate governance mechanisms, which include internal management equity incentive mechanism and external institutional investors holding. Based on the collection of the recent data of Chinese securities market, the mean proportion of management shareholding in listed companies rises year by year, and investment institutions have higher shareholdings than individual investors. It can thus be seen that more and more listed companies have adopted the following two mechanisms, which are management equity incentive and institutional investors holding. However, it is still a controversial that whether these two mechanisms can play positive roles in corporate governance. The behavior of financial restatement in a listed company means that the financial or non-financial informations released out by the company are false or inadequately disclosed, it is the appearance of defects in corporate governance.Based on the current researches, this paper studies the effects of management shareholding and institutional investors holding in corporate governance from the perspective of financial restatement. The paper selects the companies in A-share market in China that restated annual financial reports from2009to2011and their matching sample companies as the research object. The statistic data are up to December31,2012. The objective of this paper is to empirically find out whether the management shareholding and institutional investors holding are interact on each other, and whether these two mechanisms can play active roles in corporate governance.This paper is divided into six parts.Part I, introduction. It clears out research background, significance, framework, contents, method and positive effect, preparing for the later parts.Part II, literature review. This part reviews the relevant literature at home and abroad about the following four aspects:the relationship between management shareholding and institutional investors holding, the action mechanisms of management shareholding and institutional investors holding on financial restatement, the relationship between management shareholding and financial restatement,and the relationship between institutional investors holding and financial restatement.Part III, theory analysis and research assumption. First, it elaborates the basic theories and defines several relevant concepts. Then, the part analyzes the following three relationships between management shareholding and institutional investors holding, management shareholding and financial restatement, institutional investors holding and financial restatement. The part also explores the influence exerted by institutional investors on the corporate governance effect raised by management shareholding. Based on those theory analysis, it puts forward four research assumptions.Part IV, research design. It gets the research sample after sifting the data selected in accordance with the research contents. Using the theory analysis and research assumptions in the third part, it designs four models and defines each variables involved, prepared for the fifth part to carry on the empirical tests.Part V, empirical results and analysis. Making use of statistical softwares, it carries out some empirical tests on the sample data to obtain empirical results and initial analysis. It aims at testing the relationships mentioned in the third part.Part VI, conclusions, policy recommendations and future directions. On the basis of the empirical results and initial analysis, this part reaches the research conclusions and throws out two policy recommendations, meanwhile, it also tables deficiencies in the research and future directions about the research. The paper reaches the following conclusions:firstly, management shareholding and institutional investors holding are interact on each other; secondly, management shareholding plays the entrenchment effect in the process of corporate governance; thirdly, institutional investors holding plays the active external regulatory functions in the process of corporate governance; lastly, institutional investors can restrain the entrenchment effect played by management shareholding to a certain extent in the process of corporate governance.The paper comes up with two policy suggestions based on the research conclusions. First, companies should implement the equity incentive policy that is suitable to Chinese specific national situations, which means the policy oughts to inspire managements and strengthen the supervision at the same time. Second, regulators could introduce relevant policies that encourage institutional investors to participate in the governance processes of the listed companies, thus promoting the development of investment institutions in Chinese stock market.