An Empirical Study On The Earnings Management Of Domestic Listed Companies Impacted By Institutional Investors

Earnings management has been the focus of academics and practitioners. More and more scholars began to explore the reasons and factors of earnings management, and launched a comprehensive in-depth research from different angles, and strive to find the method to prevent and constrain the company’s earnings management behavior.In recent years, institutional investors has made considerable progress and become a strong investment in China’s capital market with the growing scale. Its effect on earnings management is also more and more important, and it has been got the attention of scholars. However, the existing research of institutional investors on the company’s earnings management is not mature enough, and the involved angle is not comprehensive yet. Therefore, this paper aims to further study the impact of institutional investors on earnings management of listed companies. Based on the conditions of our country, the paper try to study the relationship between the institutional investors and listed company earnings management by empirical studies, and get the conclusion, in order to make recommendations for the development of institutional investors and to improve the earnings management problems as well.This paper is divided into five parts:The first part is preface. It mainly includes the background, the significance and the frameworks. We also put forward the innovations in this part.The second part is the literature review. Firstly, we defined the institutional investors and earnings management according to previous studies. Then we elaborate the theory related to this paper. Finally, we combed the relationship between the institutional investors and earnings management and propose the perspective of this paper.The third part is the research design. Firstly, we proposed the study project. Then we put forward hypothesis and constructed the model. Finally, we design the variables according to the model.The fourth part is the empirical part, including the descriptive statistical analysis, correlation analysis and multiple linear regression analysis.The fifth part is the result of this study. We compared the result with the hypothesis. Then we put forward corresponding suggestions according to the result. Finally, we explained the limitations of this study and put forward the research prospects.This paper aims to study the relations between institutional investors and listed companies of real earnings management. The dependent variable is real earnings management, and the explanatory variables are the proportion of fund investors holdings and the number of fund investors. For a comprehensive study, three manipulated variables are involved. They are large proportion of shareholders, managerial stockholding level and the proportion of independent directors. In order to avoid the influence of other factors on the accuracy of the empirical results, the paper pull in four control variables. They are company size, asset-liability ratio, cash-assets ratio and return on total assets.The hypotheses of this paper are:(1) The proportion of fund investors holdings and real earnings management of listed companies negatively correlated.(2) The number of fund investors and real earnings management of listed companies negatively correlated.(3) Stake of the largest shareholder plays a negative role in the relationship between investors and companies real earnings management.(4) Managerial stockholding level also plays a negative ro.le in the relationship between investors and companies real earnings management.(5) Proportion of independent directors plays a positive role in the relationship between investors and companies real earnings management.Through empirical analysis, most of hypotheses are verified, except the affect of independent directors. The results show independent directors did not play its due role, and it may due to the independence of independent directors.At the end of this paper, according to the conclusions, we give several advices on the development of institutional investors and put up some recommendations to improve the earnings management problems.The innovations of this paper are as follows:(1) The new research perspective. The existing research of the relationship between institutional investors and earnings management is mainly about accrued earnings management. To issue a comprehensive study of earnings management, it is necessary to conduct in-depth study of real earnings management. The current literature on real earnings management is little, so this paper will locate in real earnings management perspective.(2) More detailed study. Existing research on institutional investors have ignored its heterogeneity, but different types of institutional investors have different features. It is necessary to classify institutional investors to make the study more specific. Fund is the main force of institutional investors and it accounts for the largest proportion, so it is very representative. Therefore, we chose the fund as research subjects.(3) More comprehensive research. When we study the relationship between funds and real earnings management, we consider the regulation of corporate governance. We chose the large proportion of shareholders, the proportion of managerial ownership and the proportion of independent directors as manipulated variables. So the study is more comprehensive and it is more in line with China’s actual situation.