Impact On Earnings Management Governance Model Institutional Investors

On China’s capital market, earnings management is the universal way that listedcompanies manipulate their financial information. Earnings management affect adverselyon the authenticity of listed companies’ financial information, reduce the authenticity andreliability of financial information, affect investors’ decisions, disrupt the normalfunctioning of the securities market. China’s Securities Regulatory Commission creativelyproposed one strategic ideology “extraordinary development of institutional investors” in2000. After that, institutional investors develop rapidly on China’s securities market.Institutional investors are different from ordinary investors in several aspects, such asprofessional analysis capabilities, Scale advantages, investment experience. Because ofthese characteristics, institutional investors could participate in corporate governance andinhibit earnings management. Whether our government or securities markets have higherexpectations to institutional investors.The core issue of this study is whether governmental institutional investors couldrestrain earnings management. From this core issue, base on the study of Bushee(1998),after improved some indicators, through factor analysis of the selected156institutionalinvestors value index score, extract common factors, calculate the mean, ultimatelyselected58governmental institutional investors. In the aspects of model construction, boththe role of corporate governance link between institutional investors and listed companiesearnings management behavior and the panel instrumental variable method be considered.Through empirical research this paper prove governmental institutional investors activelyexercise their rights and inhibit earnings management of listed companies.