Research On Earnings Management Of Listed Company Before The Lock-upperiod Terminated Of The Shares Of Private Placement

After share-trading reform, equity refinancing functions can be restored in China’s capital markets. With the introduction of the listed company securities issuance in May8,2006, the private placement of shares was officially introduced into China as a new means of financing. However, due to late start of China’s capital market, re-allocation of the interests of shareholders, which makes the largest shareholder have the subjective opportunist motives to transfer wealth through the private placement. At the same time, private placement also belong to something new on China’s capital market, the relevant laws and regulations, regulatory policy still need to be improved, which created the objective conditions for the opportunistic behavior of large shareholders. Existing domestic and international research shows that listed companies exist profit manipulation in the public issuance of new shares, rights issue, private placement. Meanwhile, the scholars further study the primary means for the transfer of benefits. The largest shareholder release of the bad news early, human control pricing benchmark, the suspension for no reason, in order to achieve the purpose of affecting the price of stock in the private placement (Zhu,2008). Chen Liang’s research shows that cheap to purchase additional shares, overestimated the value of the injected assets is also the common way of transferring benefits to the largest shareholder.However, the existing studies mainly explore the market reaction, the interest delivery, earnings management before the private placement. Few scholars study the issues related to the termination of the lock-up period of private placement. Real earnings management is not included in the scope of these researches. Therefore, this paper bases on the previous studies, chooses the termination of the lock-up period of private placement as the breakthrough point. In order to determine the possible influence factors, the author selects these listed companies which had private placement in Shanghai and Shenzhen A-share market between2006and2008as a sample, explores whether these listed companies have earnings management behavior. From the unlocked object, the nature of the company two angles, empirical analysis of whether it will affect the extent of earnings management of listed companies, in order to enrich the private placement and earnings management research.The findings in this article:First of all, listed companies have positive earnings management behavior in the previous quarter of private placement lock-up period to terminate, and the company will use both accrued and real earnings management. For accrual earnings management, the manipulation of profit is mainly reflected in the sample of associated shareholders. And the two samples have significant differences; for real earnings management, profit manipulation basically occurred in the sample of associated shareholders, but the two samples’ differences are not significant. Secondly, whether accrued or real earnings management model, the state-owned holding company’s extent of earnings management are significantly higher than the non-state-owned holding company. The management and shareholders of the state-owned holding company have greater tendency to achieve profit manipulation through accrual and real earnings management. This is probably because the state-owned holding companies prevalent have the problem of owner virtual bit as well as a range of performance evaluation pressure. Listed companies will use three real earnings management flexibility combining with the company’s position, in order to achieve the purpose of profit manipulation.The paper is structured as follows:Part Ⅰ:Introduction. This part points out the background as well as theoretical and practical significance of this article, explains the research ideas and research methods, lists the main contribution of this study as well as the article structure.Part Ⅱ:literature review. On the basis of studying the relevant literature, this article points out the inadequacies of existing research to determine the starting point, and hope to do a supplement to existing studies.Part Ⅲ:Summary of the private placement. This part includes private placement and earnings management theory description, and the private placement market situation in China.Part Ⅳ:The empirical research of the earnings management. Firstly, the existence of earnings management, using the modified Jones model, real earnings management model tests whether the listed company has earnings management behavior; Secondly, the sample data are classified into associated shareholders samples with non-associated shareholders samples, divided into state-controlled samples with non-state-owned holding samples, researching the above two sets of variables’ influence to accrual and real earnings management by grouping difference test. Finally, building accrual and real earnings management regression model, researches how the above two sets of variables impact on the earnings management behavior before the lock-up period terminate of private placement.Part V:conclusions and recommendations. The chapters summarizes the results of empirical research and proposes appropriate policy recommendations for earnings management behavior, and finally points out the inadequacies of this article.The main contribution of this paper:Firstly, there are articles which consider both accrual earnings management and real earnings management in the private placement, but little article research the earnings management behavior when the lock-up period of private placement terminates. Barely the article considers both earnings management methods in the study of this problem at the same time. This article starts from the both earnings management, in order to reveal more comprehensive about the listed company’s earnings management behavior and its influencing factors when the lock-up period of private placement terminate.Secondly, this article selects the examining window at the previous quarter of lock-up period in the private placement to terminate, not only to expand the research areas of the private placement, and the conclusions have a stronger reference. Stock markets investors can more in-depth understand of the listed company’s earnings management behavior in the lock-up period of private placement terminate, and help them make more informed investment decisions.Finally, this article subdivides unlock object and the nature of the listed companies, and studies of the above factors’impaction on both earnings management of listed companies in private placement, and strives to make up for the lack of research in related fields, provides a scientific research ideas about stock market.Inadequacies of this article:First of all, Article chooses listed company which had private placement in the2006-2008as an object of study; the final study sample is290. Because of the narrow range of samples, they cannot on behalf of all listed companies in the implementation of the private placement, is likely to come to the deviated conclusion. In addition, the time span is not enough long-term, is likely to lead to biased empirical conclusions.Secondly, the article only considers the impaction of unlock objects, and the nature of the company, not adds to the growth rate of operating income, audit institutions and other factors in the model, setting of control variables may be inadequate and fails to find the other effects of the earnings management the lock-up period of private placement terminates.