| The management state of Listed Company cannot be reflected objectively because of the false disclosure of accounting information caused by earnings management behaviors, which misleads the decisions of investors and finally breaks the rule of market. With the constant development in recent years, the institutional investors has become the backbone elements of China’s capital market. They has formed a strong team rapidly to improve the management of the company by developing their advantages like information, funds and talents. Thus, researchers begins to develop study on constraint of institutional investors and earnings management behaviors. The effects of the supervision on the management are not the same due to the differences among the institutional investors in share proportion and shareholding period. The key consideration of the study is how to further the supervision ability of institutional investors who can inhibit earnings management behaviors, which has the important practical significance.In view of heterogeneity, the effects of earnings management caused by different share proportion of institutional investors are analyzed by using Game Theory with the sample of 6946 data totally selected from Listed Company of China’s A share market between 2011 and 2013. At the same time, the restriction mechanism for earnings management conducted by institutional investors is improved along with the relationship check of share proportion and type by using empirical data.The main body of the paper can be divided into three parts:fundamental theory, empirical research and conclusion. The fundamental theory part is consisted of exordium (section 1), literature review (section 2) and theoretical analysis (section 3). The significance of the paper, research contents and method are introduced in exordium. Relevant study on institutional investors and earnings management is summarized and classified in literature review. In theoretical analysis section, Game Theory is adopted to analyze the differences of earnings management which is affected by various share proportion of institutional investors. Empirical research contains empirical study (section 4) and effect of cross variables (section 5). Hypothesis testing is performed in section 4 based on separated measurement of earnings management and types of institutional investors. Herein, further study which includes the relationship between earnings management and institutional investors if cross variable is established according to the section 4 is implemented. Conclusion part is section 6, where some suggestions are proposed based on theory and empirical results, meanwhile, limitations and prospects are also included.The conclusions of this research are as follows:(1)Based on the Game Theory model, institutional investors have will to inhibit earnings management only if there be a condition that share proportion is high and supervision cost is low. On the contrary, institutional investors do not have will to do that when the share proportion is low and supervision cost is high. (2)Institutional investors can be divided into positive ones and negative ones by using factor-analysis method. There is inverted U type relationship between share proportion of institutional investors and earnings management of listed company, as well as, positive institutional investors will inhibit earnings management while negative investors will develop earnings management. (3)The comprehensive influence of share proportion and type of institutional investors is investigated by using innovative cross variable method. If share proportion of institutional investors and positive type of shareholding is promoted, the degree of earnings management is reduced. (4)Corresponding suggestions has been proposed in three aspects:internal motivation mechanism in company, external supervision and diversified development for institutional investors. All these measures are aimed to form effective restriction mechanism of earnings management. |
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