Reduction Of Shares Held By Senior Executives,Earnings Management And Stock Price Collapse Risk

In recent years,it has been common to see executives of domestic listed companies reduce their holdings of shares by A large amount.As the "master" of a listed company,he manages the company’s affairs and decides the future development direction of the enterprise.Executives,as insiders,have more information about the future of a company than small investors in the market.Therefore,every move of senior executives is closely watched by market investors and even becomes a vane for external investors to make investment decisions.Under such information asymmetry,some related behaviors of senior executives of listed companies may lead to serious negative consequences if they are not fully understood and recognized by the market.For example,in 2015,the management of a large number of Chinese enterprises concentrated on reducing their share holdings,resulting in a sharp drop in stock prices at the market level,which seriously interfered with the healthy development of China’s financial market.Executives,as company insiders,often take advantage of information advantages to obtain higher returns in improper reduction of holdings,which greatly affects the fairness and justice of information disclosure requirements in China’s financial market,and causes great interference to investors’ decisions,leading to frequent stock price crashes.Many corporate executives manipulate the company’s performance through earnings management in advance to drive up the stock price in order to maximize their personal interests in the subsequent reduction of shares,which seriously hinders the healthy development of the capital market.Although China Securities Regulatory Commission(CSRC)is also gradually formulating relevant policies to restrict executives’ improper divestment behaviors,these measures have not played a good role according to the research conclusions of scholars on the phenomenon of divestment in recent years.Therefore,this paper hopes to analyze the role of earnings management in executive divestment and stock price crash risk,and provide a new perspective for relevant policy makers to formulate normative documents on executive divestment,so as to improve the status quo and improve relevant systems.Based on the transaction data of top executives’ selling of a-share listed companies(non-financial)in Shanghai and Shenzhen from 2016 to 2020,this paper studies the influence direction and mechanism of top executives’ selling behavior on stock crash risk.The research shows that :(1)there is A significant positive correlation between the size of top executives’ selling and the risk of future stock price crash.(2)In the quarter before the reduction,corporate executives usually cooperate with the reduction through accrual earnings management.In the channels through which the reduction of executive holdings affects the risk of stock price collapse,accrual earnings management rather than real earnings management plays an intermediary role.(3)When the sample companies are grouped according to different property rights,it is found that the mediating effect of accrued earnings management is significant in non-state-owned enterprises,but not in state-owned enterprises.In terms of theoretical significance,this paper is an in-depth promotion of the research results on the impact of executive reduction on stock crash risk.In terms of practical significance,this paper is of great significance to improve shareholders’ awareness of risk prevention for executive divestment,enhance small and medium investors’ awareness of vigilance,provide regulatory focus on executive divestment,regulate the related economic activities of listed companies and their executives,and ensure the stable and healthy development of the capital market.