The Empirical Study Of Relationship Between Shareholding Structure, Internal Controls And Earnings Management

Frequent cases of financial fraud both at home and abroad of the listed companies, reveals the weak of internal control systems. And the increasingly perfecting of the internal control system in our country, offers a new way and the basis for the research of internal control. The concept of earnings management started in the 80’s by western accounting theory.By the development of the market in our country, people gradually know and accept the concept of earnings management From security markets in our country beyond recent years,a number of large cases was found and investigated, we can see that the phenomenon of stock price manipulation is becoming much common. But the application of earnings management means to manipulate earnings, easily lead to make the accounting information distortion,and influence the capital market. Internal control system as an important part of corporate governance mechanism, the perfect degree can not only improve the efficiency of the company’s internal management, but also can effectively restrict the ability of executives and shareholders’earnings management, so the accounting information can effectively reflect the characteristics and risk of the economic business and task.The research of Modern corporate governance has shown that under background of the two rights separation of modern enterprise system theory, ownership structure, for the principal to the agent’s behavior monitoring will produce certain effect, and thus affect the level of the company’s internal control and earnings management level. Therefore, this paper argues that the ownership structure of listed companies how to reduce an influence between internal control and earnings management.This paper based on the boards of main Shanghai and Shenzhen A-share listed companies during 2009-2012 as samples, firstly examined the relationship between internal control and earnings management, then tested the factor of company’s shareholding structure how to influence the relationship.The study found that:the internal control of companies can significantly reduce the earnings management behavior of listed companies. In addition, compared with the non-state enterprises, the internal control of earnings management in state-owned companies reduce effect more apparently. Beyond that,the proportion of major shareholders of listed companies, and the degree of the separation of cash flow rights also produce certain effect on the relationship between internal control and earnings management. This paper improves that high percentage of control and two power separation, reduces the negative relationship between the relationship of internal control and earnings management.