Study On The Impact Of Equity Of Major Shareholders Of Sihuan Biotech On Earnings Management

Equity pledge refers to a debt financing method in which the company’s equity is used as a pledge to borrow money from financial institutions.Equity pledge solves the company’s capital requirements for a specific scope,but it also has some risks.For controlling shareholders,when the price of mortgage assets falls near the warning line,they will be under pressure to cover their positions.If the price of the collateral falls below the liquidation line and the major shareholders cannot add collateral in time,these shares will be forcibly sold by the bank,resulting in the transfer of control of the company.In order to prevent the equity pledge from being liquidated or the control right changing hands,there is a strong incentive for major shareholders to use earnings management to stabilize stock prices.In view of this,this paper adopts the case study method,selects Sihuan biology with high equity pledge rate of major shareholders as the case enterprise,studies the impact of Sihuan Bio’s major shareholder equity pledge on earnings management,and makes a specific analysis of the case company based on the ideological line of "earnings management motivation under major shareholder equity pledge → earnings management means under major shareholder equity pledge→ operating performance evaluation after equity pledge".Firstly,this paper expounds the research background,literature review and research significance.Secondly,it defines the related concepts of major shareholders,equity pledge and earnings management involved in the case study,then introduces the case company Sihuan biology,understands the current situation of equity pledge of major shareholders,analyzes its financial situation before and after equity pledge,and calculates the accrued earnings management and real earnings management degree of Sihuan biology by using the modified Jones model and Roychowdhury(2006)model,Comparing the changes of earnings management degree before and after equity pledge,this paper selects the enterprises in the same industry that are equivalent to the scale of Sihuan biology without major shareholder equity pledge for comparative analysis,analyzes the motivation and means of earnings management under equity pledge,and then evaluates the economic performance after equity pledge.Finally,relevant policies and suggestions are put forward according to the actual situation of the case.The case analysis results of this paper confirm that the equity pledge of major shareholders has an impact on the deposit earnings management,which is mainly reflected in that after the equity pledge,the degree of accrued earnings management is mostly higher than the industry Da average,and its accrued earnings management has the trend of conversion to real earnings management.Through the analysis,we also know that the earnings management behavior after equity pledge is not conducive to the sustainable development of enterprises.