Study On The Impact Of Margin Trading On Corporate Earnings Management

Margin trading has a long history in developed countries and it has been relatively mature,and China has launched the margin trading business officially since 2010,the development is still in the initial stage with only a few years.Its launch gets concerns from the market investors and academics.This milestone has brought the short selling mechanism for the first time,and China's market has entered the new era of bilateral trade.In most existing studies,discussion focuses on the impact of margin trading on market efficiency and some other aspects,but what we need pay attention to is that information is a link of the market and the company,bidirectional information transfer between investors and managers links up margin trading and management behavior of the target companies.It is a pity that research about the very influence in company is extremely scarce.Among them,the very few papers in China failed to reach an agreement conclusion about whether it will affect the target company's earnings management level.Because of the short history of margin trading and the unbalanced development in China,the relevant exploration must be constantly advancing as time goes by and as data becomes more abundant.Under the background,this paper attempts to explore what impacts margin trading will have on the management behavior,especially the earnings management operation.Firstly,this paper which respectively analyses the possible relationship between margin trading and earnings management is based on the contract theory,principal-agent theory,asymmetric information theory,efficient market theory and signal transmission theory;next,regards the margin trading system as an exogenous policy,and as a whole to test the impact on earnings management,and uses the difference in difference(DID)model with three groups of samples to do empirical analyses;then,this paper tests the effects brought by margin purchase and short selling relatively via regression test,and further discusses whether the influence of short selling is different due to level of marketization.The study shows:first,the impacts on earnings management of margin trading system changes over time from zero to a weakly inhibitory effect,means it gradually plays the role of external corporate governance on target companies;second,margin purchase plays a role in promoting accruals earnings management;third,short selling plays the role in inhibiting accruals earnings management,but only in the areas where the level of marketization is high.Margin trading is expected to play a positive role and what is needed to do is to improve the follow-up policy,expand the scale of margin trading,get better balanced development and make it more mature and closer to foreign developed markets,so as to bring benefits both to the market and the companies.