An Empirical Research On How Collateral Level Of China’s Listed Companies’ Equity Affects Its Earnings Management

With the development of China’s capital market,Pledge of stock rights is becoming more and more popular.According to the Eastern-Wealth Network,93.69 percent of the shareholders in listed companies have the behavior of pledge of stock rights pledging shares with a market value about four point two seven trillion Chinese Yuan,and 133 listed companies have equity pledge proportion of more than 50%,16 listed companies pledge proportion of more than 70% until 28 Dec 2018.The scale of China’s stock rights pledge business has been expanding in the capital market,while the proportion of pledge of stock rights in listed companies has also increased significantly.This reflects the positive impact of pledge of stock rights on listed companies and their shareholders in financing,but we should also pay attention to the risks posed by this business.When the stock price falls,the shareholders with pledge of stock rights will face huge risks,and this risk is positively related to the proportion of pledge of stock rights.Therefore,in order to avoid risks and safeguard their own interests,it is highly probable that the major shareholders and managers work together on earnings management to achieve the goal of rising stock prices.In addition,the nature of the company’s property rights will have a different impact on the earnings management of the pledge company.In addition,the nature of company’s property rights will have a different impact on the earnings management of the pledge company.Based on the above reasons,this paper will study the relationship between equity pledge,property rights and earnings management.This paper will use the data from 2014 to 2017 in Shanghai and Shenzhen as a research sample.As the market environment has changed,the stock pledge behavior of shareholders has been studied from a newer perspective.In the research,this paper constructed three models after combing the literature and theoretical analysis: the model of the influence of the proportion of pledge of stock rights and the nature of property rights on earnings management,the model of the impact of the proportion of pledge of stock rights on actual earnings management and the model of the effect of the proportion of pledge of stock rights on various manipulations of actual earnings management from the perspective of the nature of corporate property rights.And empirical tests were made by using these models.The study found that:(1)the proportion of pledge of stock rights in Chinese listed companies is positively related to the company’s earnings management level;(2)When a listed company has pledge of stock rights,the actual earnings management level of state-owned enterprises is higher than that of private enterprises;(3)The impact of the proportion of pledge of stock rights in state-owned listed companies on real earnings management is inhibited by the nature of the company’s property rights.At the same time,the nature of state-owned property rights can inhibit the impact of rising pledges of stock on production,sales and cost manipulation.The research in this paper takes the proportion of pledge of stock rights in listed companies as the research angle,rather than the previous “whether there is equity pledge behavior”.In addition,this paper also discusses the agency problems caused by pledge of stock rights and the protection of stakeholders,which will play a certain role in the healthy development of China’s stock pledge.In the last chapter,the paper puts forward relevant suggestions based on the research conclusions of the article.The author believes that enterprises should be urged to properly operate pledge of stock rights for financing in a number of ways so that enterprises can develop healthily in the long run.Measures can be taken from both inside and outside the company.Within the company,the supervisory role of the board of directors and the board of supervisors should be fully exerted,and the internal control system and the optimization of the shareholding structure should be strengthened.In the outside of the company,the regulatory department needs to improve and fully enforce the relevant laws,and the pledgee should strengthen its own risk management.