Research On The Influence Of The Institution Investors’ Network Location On The Quality Of Financial Reporting

In recent years, with more and more financial fraud and financial scandals emerging inChina’s stock market, investment decisions of investors have been affected. Based on theexisting literature, study the institutional investors affect the quality of financial reports fromthe perspective of social network; Whether the ability of institutional investors to participate ingovernance is related to its network location, whether it impact the quality of financialreporting; All of these questions need to be studies in the future. Solving these problems canhelp to answer the question that which feature of institutional investors can help to enhance thequality of financial reporting and to improve the corporate governance. It can enrich the theoryof corporate governance, provide a new path for improve the quality of financial reporting.After reviewing the existing literature related to social network, the quality of financialreports and institutional investors, conduct a mechanism analysis about how the institutionalinvestors’ network location affects the quality of financial report. Based on this, explore theinternal logic between institutional investors’ network location and quality of financial report.And then select the data of A-share listed companies from the period2008-2013. Based on thenetwork formed by institutional investors which living in the top ten shareholders, useUCINET calculate the institutional investor’s network location. Use Jones model to calculatethe absolute value of discretionary accruals, as an alternative variable of financial reportingquality. Regard the quality of financial reporting as the dependent variable, while current andlast period network location indicators and interaction terms as independent variables. UseSPSS make regression analysis between them together with a number of control variables, toexamine the relationship between institutional investors’ network location and the quality offinancial reporting, whether the interaction between network location and the dominant fundwill enhance this relationship. Finally, using the type of audit opinion replace the absolutevalue of discretionary accruals, conduct robustness regression test.The empirical tests show that when institutional investors located in central andintermediary network position, the quality of financial reporting is better than others. If thefund company dominates the entire institutional investors, their relationship will moreremarkable. Therefore, the research enriches the theory of corporate governance, and points out a new path to the quality of financial reporting research.