Pyramid Structure,Internal Capital Market And Earnings Management

In recent years,corporate groups have gradually increased,and pyramid-type holding structures have become common among listed companies in China.China's equity is relatively concentrated,and the agency issues of major and minority shareholders are relatively prominent.However,the pyramid structures are not always the tools of major shareholders to plunder minority shareholders.The supportive effect of the pyramid structure can also bring financial supports to companies that are in financial difficulties.At the same time,due to the diversity of corporate entities and the complexity of internal and external environments,there maybe different economic consequences during the actual operation process in the internal capital market,which can not only improve the operating efficiency of the company,but also become means for the controlling shareholder to infringe the minority shareholders.With the development of market economies,surplus information occupies a pivotal position in the capital market.The financial information disclosed by listed companies is increasingly valued by investors and other stakeholders.The accounting earnings information is an important indicator reflecting the profit and loss of listed companies.The effective use of surplus information directly influences whether stakeholders such as shock holders,creditors,and investors can accurately predict the future development potential of listed companies.In order to raise external funds,listed companies will conceal the infringing behavior of interests,reduce the level of disclosure of surplus information,and carry out earnings management,which will not only reduces the quality of earnings information,but also undermines the interests of the minority shareholders.Therefore,it is of great significance to study the influence of the pyramid structure and internal capital market on the management of earnings.This paper selects the data of 296 A-share listed high-tech enterprises in China from 2007 to 2016 as a sample,examines the method of earnings management in the pyramid structure in enterprise groups,and then explores the role of internal capital market in earnings management of enterprise groups.Finally,it builds the cross-variable of pyramid structure and internal capital market to explore whether the internal capital market affects the relationship between pyramid structure characteristics and earnings management levels.The empirical research results show that the separation of two rights,level,complexity of the pyramid structure are significantly positively correlated with accrued earnings management,and have a significant negative correlation with real earnings management.The internal capital market can suppress accrued earnings management and strengthen real earnings management.Further tests show that after considering the role of internal capital market,the relationship between pyramid structure and earnings management is reversed.Based on the above theoretical and empirical analysis,this paper proposes several policy recommendations and points out the direction for future researches.