The Influence Of The Institutional Investors On The Earnings Management Of Listed Companies

The capital market imperfections, internal control and "dominance" and other problems in China all lead to the principal-agent conflicts and asymmetric information, which prompt the problem of earnings management in endlessly. But institutional investors, as strong outside shareholders of listed companies, have the ability and motivation to affect earnings management behavior, which are aroused the attention of academia and even regulators. Therefore, this paper studies the problem about the influence of institutional investors on the earnings management of listed companies.First, through considering to measure the index of institutional ownership from two angles of absolute quantity and relative quantity, the paper studies the problem about the overall shareholding ratio and the average stake of the institutional investors exert influence on the earnings management of listed companies. Then, according to the length of the holding period, this paper also makes empirical study about the long-term mechanism and the short-term mechanism impact on earnings management. At last, based on the study of Brickley, etc (1988), the paper further examines that the dependence of institutional investors affect the earnings management.The main work and contributions are as follows:First, this paper studies that the shareholding ratio of the the institutional investors affect the earnings management from two angles of absolute quantity and relative quantity. This paper respectively adopts "the overall shareholding ratio" and " the average shareholding ratio" as variables, depicts the institutional investor shareholding impact on company earnings management, corrects that consider overall equity rather than the average in the predecessors’ past research, eliminates the influence of institutional equity status on the earnings management, and especially emphasizes the behavior characteristics of the institutional investor shareholding, and makes the empirical research results more accurate and precise. Through the research, we can get the following conclusions:the overall proportion and the average proportion of institutional investors holding all negatively correlate with earnings management.Second, this paper also studies about the holding period of institutional investors impacts on earnings management. This paper defines the long-term institutional ownership and short-term institutional ownership variables, makes up for the existing research overall stake in the single variable metric information content as well as mufti-feature variable metric duplicate redundant defects, revises the impacts of sample interval and sample range in domestic research on the result of research, and makes empirical study about the holding period of institutional investors impact on earnings management. Finally this paper confirms that the long-term institutional investors holding is negatively related to the degree of earnings management of listed companies, the short-term institutional investors holding is positively related to the degree of earnings managementThird, based on the study of Brickley, etc (1988), the paper further examines that the dependence of institutional investors affect the earnings management. This paper defines independent institutional ownership and dependent institutional ownership variables, perfects the study of institutional independence, not just to stay in the past research about its impact on corporate governance and agency cost etc, and expands the institutional independence in the level of earnings management. By building regression model, this paper confirms that the independent institutional ownership is negatively related to the degree of earnings management, dependent institutional ownership is positively related to the degree of earnings management.