Auditor's Characteristics,Pledge Of Stock Rights And Earnings Management

The pledge of stock rights is a way to get funds by taking the equity which pledgees own as the subject matter of the pledged.For controlling shareholders,on the one hand,the emergence of equity pledge provides a new financing way for them,alleviating the financial difficulties caused by financing constraints;on the other hand,it increases the risk of controlling shareholders.Once the stock price falls seriously,the controlling shareholders may fall into financial difficulties or transfer control rights,which is most of the controlling shareholders do not want to see.Compared with other guarantees,the pledge of equity is stock.The more stable the price of stock is,the more able to guard against financial distress and the risk of control transfer.Therefore,controlling shareholders will have the motivation of stabilizing or even raising the stock price.The stock price reflects the expectation of the external investors for the future performance of the company.This expectation is related to earnings information.Therefore,controlling shareholders will have strong motivation to manage earnings in order to stabilize the price of stocks and to prevent the occurrence of risks.Earnings management often brings adverse consequences to the stakeholders of listed companies,so scholars have been discussing how to effectively govern the earning management.Now earnings management governance generally includes two aspects,internal governance and external governance.Many scholars have found that auditing can affect earnings management as an external governance mode,such as auditor's industry expertise,audit input,the size of accounting firms,auditor's personal experience and other factors.At present,many scholars at home and abroad have studied the auditor's characteristics,equity pledge and earnings management,but most of them only focus on the relationship between two aspects,only considering the relationship between equity pledge and earnings management,or the interaction between earnings management and auditor's characteristics;at present,no one has studied the relationship among them.But under such a prevalent situation,how to regulate the company's behavior as far as possible,restrain earnings management,and prevent the damage of equity pledge to creditors,small and medium shareholders and external investors is a problem that must be considered at present,which has great practical value for protecting the interests of all stakeholders.On the basis of the existing research results,this paper first combs the relationship between the equity pledge' behavior of controlling shareholders and earnings management,adds the auditor's personal experience and auditor alumni relationship as two auditor characteristics,and respectively explores their regulatory role in the relationship between equity pledge and earnings management.Secondly,according to the actual situation of our country,this paper defines the core concepts of this study,introduces the relevant theoretical basis,and puts forward the research hypothesis of empirical analysis in this paper.Based on the data of A-share companies listed on Shenzhen Stock Exchange from 2011 to 2017,this paper constructs a regression model of controlling shareholders' equity pledge,earnings management,auditor characteristics,and the role of auditor characteristics in regulating the relationship between them,and deeply analyses the role of auditor-level characteristics in regulating the relationship between controlling shareholders' equity pledge and earnings management.It found that the occurrence of equity pledge by controlling shareholders is negatively correlated with the accrued earnings management,and positively correlated with the real earnings management.Auditor's personal experience and alumni relationship will reduce accrued earnings management and enhance real earnings management.After adding the measure and adjustment function of the interaction item,it found that the auditor's personal experience and alumni relationship have a positive moderating effect on the relationship between equity pledge and earnings management(including accrued earnings management and real earnings management).It illustrates the auditor's personal experience and alumni relationship could improve the audit quality,increase the external supervision pressure faced by controlling shareholders,change shareholders' expectations of earnings management after equity pledge,and enhance the "substitution" between accrued earnings management and real earnings management.This paper regards the occurrence of the specific behavior of controlling shareholders' equity pledge as the starting point of the study,and discusses the impact of equity pledge and auditor's characteristics on earnings management,which enriches the relevant research on earnings management and equity pledge.It provides some reference for small and medium-sized shareholders,external investors and creditors to make relevant decisions,and provides a theoretical basis for regulators to formulate relevant policies.