Large Shareholder's Tunneling, Internal Control And Disclosure Quality Of Earnings Forecasts

The traditional financial accounting information only reflects the past or present operating conditions,which cannot meet the needs of investors' decision,so the prospective financial information that reflects the future situation is increasingly valued by investors.Earnings forecasts as the company's future earnings information forecast,which are made by the management layer,have a certain forward-looking,once the company's future earnings information make mutation,they can timely disclose in the market and release huge volatility risk of the company's earnings,in order to prevent the black swan events happen,so they are concerned and attended by the investors.Because earnings forecasts have a significant impact on the investors' decision and are made by the management layer basing on the company's production,operation situation and the industry's future development prospects,so some interest groups manipulate earnings forecasts,in order to seek personal gain,leading implementation effect is opposed to the original intention,the actual effect is worrying.In the corporate governance of modern joint-stock enterprises,the ownership and the management rights are in the hands of shareholders and management layer respectively,but holding the ownership shareholders have a significant impact on the election and appointment of corporate members such as the company's board of directors,especially for some relatively concentrated equity of the company,as the company's actual controls,large shareholders rely on their vote right to control the company's board of directors and other authorities,in order to impact the company management's behavior.High concentration of ownership structure will lead to the second kinds of agency problem,namely large shareholders invade the interests of small and medium shareholders,and large shareholders may tunnel the listed companies to achieve their control benefits.large shareholders' tunneling has a series of serious consequences,it would seriously reduce the company's future development capacity and profitability,once large shareholders' tunneling behavior was discovered by the capital market,not only the listed company will be investigated and punished by the SFC,but also be abandoned by investors,facing a huge risk of litigation.Management earnings forecasts will put large shareholders' tunneling behavior early expose,so in this case,in order to hide their own tunneling behavior and maximize their own interests,whether large shareholders will manipulate earnings forecasts through professional managers,which are controlled by them?Whether internal control can curb the opportunistic behavior of large shareholders?From the perspective of disclosure quality of earnings forecasts,using the 4208 records of A-shares from 2009�2014 as the final research samples,on the situation of large shareholders' tunneling,in order to hide tunneling behavior and realize the benefits of control,this article studied large shareholders whether manipulate earnings forecasts by controlling the management layer and internal control whether can inhibit the tunneling behavior of large shareholders.Firstly,based on the principal-agent theory,information asymmetry theory and signal transfer theory,this article analyzed when large shareholders tunneled the listed-company,large shareholders whether manipulate earnings forecasts by controlling the management layer,then considering internal control,this article studied internal control whether can restrain large shareholders to manipulate earnings forecasts.In order to verify the two assumptions,the article designs two multivariate linear regression models.In the multivariate linear regression model,large shareholders' tunneling as explanatory variables,disclosure quality of earnings forecasts namely earnings forecasts deviation as explanatory variables,while controlling the company' size,the proportion of institutional investors,whether the company is a loss,cash flow from operating activities,the proportion of independent directors,asset-liability ratio,analyst's attention,management pay,the ratio between the largest shareholder shareholdings and the second to fifth largest shareholders shareholdings and managerial stockholding level.The study found that large shareholders' tunneling and disclosure quality of earnings forecasts significantly negative correlate,while internal control can alleviate the negatively relationship between large shareholders' tunneling and disclosure quality of earnings forecasts.This paper has six parts.The first part is introduction.This part introduces the importance of disclosing the forward-looking accounting information,then studying how large shareholders' tunneling will affect disclosure quality of management earnings forecasts.The second part is literature review.This part collect earnings forecasts,large shareholders' tunneling and internal control three aspects related literature at home and abroad,then summarized literature review on these research results,pointed out the direction and key points of these research.The third part is Basic theory of the relationship among large shareholder's tunneling,internal control and disclosure quality of earnings forecasts.This part first explained the concept of large shareholder's tunneling,internal control and disclosure quality of earnings forecasts.Then,based on principal-agent theory,information asymmetry theory and signal transmission theory,this paper clarified the relationship between largeshareholder's tunneling and disclosure quality of earnings forecasts.The fourth part is theoretical analysis and research hypothesis.This part firstly deduced the relationship between large shareholder's tunneling and disclosure quality of earnings forecasts,then considering internal control,studied the company's governance function of internal control on the relationship between large shareholder's tunneling and disclosure quality of earnings forecasts is still valid.The fifth part is research design and empirical results analysis.This part used STATA12.0 for data analysis.The data analysis included descriptive statistics,correlation coefficient matrix and multiple linear regression analysis.The sixth part is conclusion and policy recommendations.