The Study On The Interactive Effect Between Short Selling And Earnings Management

In countries with developed financial and capital markets,such as the United States and Japan,margin trading system is a common trading system in their securities markets.On the one hand,China's securities market started late,and the development time was short.At the beginning of the establishment of China's securities market in 1990 s,our exploration of capital market can be likened to "crossing the river by feeling the stones".To avoid market risks out of control,credit transactions are not allowed.On the other hand,China's securities market is growing fast.After 20 years of development,China's securities market mechanism has gradually improved and matured.Much attention has been paid to the margin trading system.In order to ensure the sound and healthy development of the financial market,on March 31,2010,China's securities market began to try out margin trading system,which marks a partial release of short selling limit in China's securities market,and China's securities market opened a new era with credit transactions.Learning from foreign capital market,margin trading system can serve as price stabilizer,and can improve the pricing efficiency of the market.Because the opening of margin trading system will bring many benefits to the capital market,the market participants have great expectation and close attention to the development of the system.At the same time,margin trading system is an inevitable choice to set up a short rule.If there is a lack of short mechanism,investors will profit from the stock price rise.This irrational rise will eventually bring the irrational fall of the stock price.After the "615",the positive role of margin trading system has been questioned by all sectors of society.As the market development is not mature enough,it is influenced by many factors such as market effectiveness,information asymmetry,strong capital investors manipulation and so on.Whether the margin trading system can play its positive role or not,its policy effect is good or bad,it needs further study.The scholars have disputed the effects of the implementation of the margin trading system.The margin trading system is connected to the whole market.Therefore,it is necessary to study the implementation effects of the margin trading system,including effects on the securities market,as well as its influences on the participants in the market.Firstly,this will help to enrich the research on the effects of margin trading system.And secondly,even though the financial market in China,which is the second largest economy in the world,is rapidly growing,it is not mature yet.The research on the margin trading system is not only beneficial to the management and prevention of possible risks and gaining controls of the financial market in China but also will help us behave better in international markets.Financial transactions and building a financial transaction system that suits China's conditions are of great practical significance.Scholars at home and abroad have conducted in-depth research on margin trading system,which is rich in theory,and laid the foundation for the research of this paper,but there were also some shortcomings.In foreign countries,the research on the economic consequences of margin trading system and the characteristics of stock financing is relatively much more,while domestic research is more concerned with the change of market efficiency before and after the margin trading system.At present,there is no literature systematically has studied the interaction effects between short selling and company earnings management under the premise of endogeneity.That is to say,excluding the influence of endogeneity,there is still lack of empirical evidence to clarify the relationship between margin and corporate governance.Based on the above research and the existing research,the article takes the securities that can be short sold as the research object after the pilot,with the margin trading amount and corporate governance as endogenous variables,to establish a joint equation group.Through this way,we can find the real interaction effects between short selling and corporate governance.On the one hand,it will help to improve the margin trading system;on the other hand,it will help to strengthen the governance of listed companies.The research contents of the paper consist of the following aspects:First,the relevant literature is combed.Considering the two effects of the margin trading system,which are securities market effect and corporate governance effect respectively,this paper collects the literature at home and abroad,and focuses on the related research results of the corporate governance effects on margin trading system.The interaction effects between short selling and earnings management is analyzed in consideration of endogenous nature.Secondly,through theoretical analysis,the paper reveals the transmission effect between short selling and earnings management,in order to lay the groundwork for follow-up empirical analyses of the interaction between the two.Thirdly,the companies,which is the subject of the short selling system,is the object of this research.The short selling level is measured by the margin trading amount,and the earning management is used as the agency variable of the corporate governance.Without considering the endogeneity,this paper uses single equation to analyze the influence of the margin trading level on earnings management and whether the manipulation of earning management will lead to the increase of margin trading amounts.Fourth,we use the Hausman set test to test the endogeneity of short selling and earnings management.Combined with the test results,the 2SLS method is used to systematically estimate the simultaneous equation.Finally,according to the existing analysis,the following conclusions are drawn: without considering the endogeneity,the higher the company's accrual earnings management level is,the less the margin is;and the more the stock shorted,the lower the accrued earnings management level is.In the case of endogeneity,the higher the management level of the accrued earnings management is,the higher the possibility of short selling is;and the more the stock is shorted,the higher the accrued earnings management level is.However,there is no significant interaction between real earnings management and short selling margin.On the basis of the study of the interactive relationships between the short selling and the earnings management,the following suggestions are put forward: the regulators should establish a perfect regulatory mechanism,perfect the accounting standards and improve the efforts of supervision and punishment;the stocks that can be shorted should be reviewed regularly;the listed companies should actively improve the level of corporate governance to ensure the wealth of stockholders increase orderly and stably.