Features Of Institutional Investors、 Internal Control Quality And Enterprise Earnings Management

Along with the development of institutional investors, they are playing an increasingly important role in the capital market. At the same time, the emergence of many financial scandals, such as the earnings management, exposed the weakness of the enterprise internal control, and the earnings management behavior brings serious harm. Using the sample of all non-finance A-share listed companies in Shanghai stock market and Shenzhen stock market in 2013, this paper studies the relationship between the features of institutional investors, quality of internal control and enterprise earnings management, and tests the regulatory effect of internal control quality between the institutional investors’ownership. Considering the independence, ownership scale and nature of the institutional investors, this paper divides institutional investors into three types, whose share proportion weights the institutional investors’ features. This research measures the quality of internal control with the disclosure of internal control deficiencies, evaluates enterprise earnings management with modified PPE. The research result shows that there is a significant and negative correlation between large share proportion, independent, domestic institutional investors and enterprise earnings management. In addition, the study also finds that, when we treasures the regulatory effect of internal control with the disclosure of internal control deficiencies, the significant and negative correlation between three kinds of institutional investors and enterprise earnings management do not change. From the foregoing, we may draw a conclusion that the internal control doesn’t have the regulation role between institutional investors and enterprise earnings management. Finally, the paper puts forward related policy suggestions of investors, internal control and departments of supervision based on the research results.