The Short-selling Mechanism,share Reduction Of Large Shareholders And Earnings Management

The excessive concentration of shares of large shareholder has always been a common feature of listed companies in China.Excessive concentration of equity often leads to the lack of effective restraint and supervision of the actions of large shareholders.It is a common way for large shareholders to carry out earnings management before the reduction to raise the stock price and maximize the benefits of reduction.In 2010,China officially established a short-selling mechanism.For short-selling investors,they have great incentives to explore and disclose the negative information of listed companies,which leads to the decline of stock prices of listed companies to achieve their arbitrage.It can be seen that there is a conflict between the interests of short-sellers and the interests of the large shareholders who want to reduce their equity.This paper selects all the A-share listed companies from 2009 to 2018 as the research samples.It's found that the large shareholders will carry out positive earnings management before the reduction of shares to raise the stock price and maximize personal interests.And the more the reduction of shares,the greater the degree of positive earnings management.After the introduction of the short-selling mechanism,the short-selling mechanism can effectively suppress the earnings management behavior of the large shareholders before the reduction.Further exploration also found that the short-selling mechanism is affected by both internal and external factors.