Research On The Influence Of Institutional Environment On Earnings Management Of Chinese Listed Company

High-quality accounting information plays an important role in stabilizing the development of the capital market.However,in recent years,there are still numerous financial frauds and information disclosure violations of Chinese A-share companies have been exposed repeatedly.The manipulation of earnings information by listed companies not only brings many losses to Chinese investors,but also seriously undermines Chinese capital market.The institutional view holds that the institutional environment has a profound influence on corporate behavior.Since the related research on "Law and Finance" rose and developed,domestic and foreign scholars began to pay attention to the impact of company’s institutional environment on earnings management.However,most of the literature discusses the governance of earnings management from the perspective of external institutional environment,neglecting the imperfection of internal institutional environment is the root of breeding earnings management behavior.In addition,the relationship between the external institutional environment and earnings management is still inconclusive.Based on the above,from the perspective of constraints and incentives,this paper studies the relationship between internal institutional environment and earnings management;Combined with the theory of “legitimacy” and “system pressure”,this paper explores the relationship between external institutional environment and earnings management.Taking the financial data of 8665 listed companies in Shanghai and Shenzhen from 2013-2017 as research samples,a multiple regression approach was used to examine the differential impact of internal and external institutional environments on earnings management,and then put forward specific policy recommendations.The results of this study indicate that:(1)Overall,a complete internal constraint and incentive institutional environment can curb accrual earnings management,but it does not effectively reduce the level of real earnings management;further studies have found that in the context of internal incentive institutional environment,salary incentives can play an effective role in inhibiting real earnings management.An uncompleted equity incentive system is one of the reasons why the overall internal incentives institutional environment of listed companies cannot suppress real earnings management.(2)Within the external institutional environment,the increase of marketization level cannot effectively curb accrual earnings management,but it can reduce the level of real earnings management.Although the increase of investor protection level reduces the degree of accrual earnings management of listed companies,it induced real earnings management;government intervention is an important factor in inducing both accrual and real earnings management;further research show that the result of that investor protection level can inhibit accrual earnings management only exists in non-state-owned enterprises;(3)Compared with external institutional environment,the imperfection of the internal institutional environment is the root of breeding earnings management behavior.The above results indicate that,on the one hand,relevant government departments must further improve the external market environment and strengthen the construction of the legal institutional environment.Eliminate regional differences in the external institutional environment of enterprises by reducing the level of government intervention,raising the level of investor protection,especially paying attention to the reform of state-owned holding companies to implement relevant legal systems,and improving the market mechanism of professional managers.On the other hand,listed companies in China should combine Chinese special national conditions,focusing on the reconstruction and optimization of the internal incentive institutional environment,optimizing monetary incentives,and adjusting stock incentives arrangements.This research helps to understand the differences impact of internal and external institutional environment on earnings management,and provide some inspiration for the regulatory authorities to formulate corresponding policies.