Relationship Of Earnings Management And Investment Efficiency Under Different Ownership Structure

Earnings management has been a hot research in theory and practice. There are worldwide earnings management behavior to achieve their financing, tax, and maintain the listing qualifications. A wide range of earnings management is bound to cause serious and widespread economic consequences. At the same time, the company’s internal decision-makers will make irrational investment decisions because of earnings management, and irrational investment decisions will inevitably lead to inefficient investment. Business investment decisions mainly influenced by information asymmetry and agency problems, while theoretical root of earnings management is also the "contract friction" caused by information asymmetry and the agency relationship. Therefore, there is a close link between earnings management and investment efficiency. Based on this background, this thesis in-depth analyze the impact of earnings management and the investment efficiency, as well as different impact under the background of different corporate ownership structure from these three perspectives of agency conflict between shareholders and managers, between large shareholders and minority shareholders, the information asymmetry, in order to clear different effects on earnings management within the enterprise investment decision under the background of different corporate ownership structure, to provide a new perspective to improve the their investment efficiency for enterprises.The thesis use theoretical analysis and empirical analysis method. In theory, The thesis reference a lot of documents, in-depth understand the concept of earnings management and investment efficiency through Carding and summarize the relevant literature and theoretical basis, and further analyze the relationship between the two under different ownership structure, and then propose hypotheses; In the empirical, this thesis selects 2012-2014 A-share listed companies as the sample, and selects investment efficiency as explained variable, earnings management as explanatory variable, ownership structure as moderator variable, selecting executive compensation, major shareholders funds, the management expense ratio, free cash flow,ROA and ownership property as the control variables, and examine the relationship between earnings management and investment efficiency by regression analysis. The empirical results show that:earnings management and inefficient investment is a significant positive correlation; At the same time, compared with the equity relative concentration’s listed companies, earnings management will greater exacerbate overinvestment or underinvestment in highly concentrated and highly decentralized ownership’s companies. This conclusion is consistent with the hypothesis and theoretical analysis.Therefore, indeed there is a close relationship between earnings management and investment efficiency, while different ownership structure also does affect the relationship between earnings management and investment efficiency. Enterprises should should reasonable control their earnings management degree, improve the quality of accounting information, reduce information asymmetry, relief agency problems according to own ownership structure characteristics, so as to improve investment efficiency. The thesis provides a new direction for future investment efficiency’s research and provides some recommendations to improve investment efficiency according to own ownership structure for listed companies.