Research On The Influence Of Internal Markets Of Business Groups On Earnings Quality Of Listed Companies

The trades of members which are independent legal entity in the business group are more frequent in China, which lead to the internal market of business groups. As the complexity of the environment and the diversity of interest, the internal market of group shows complex economic consequences in actual operation. On the one hand, the internal market of group enhances efficiency, on the other hand, it becomes a major means of "tunneling" of shareholder. At the same time, with the development of economy, the accounting information becomes increasingly important. Earnings quality has become important accounting information, which is most concerned by investors. So, it becomes important that we research the internal markets influence accounting earning quality.First, this article defines the internal markets of groups and the earnings quality.Secend, this article introduces correlative theory from the aspect of efficient ehhancing and tunneling, which play a supportive role on the theory. It is a focus of the article how the internal market and its operation of business groups influence earnings quality. This article has a research on internal product market, internal capital markets, internal asset markets, internal guarantee market and other internal market in detail. Theory shows that the internal market has a positive and negative role on earnings quality. Then, the article analyses the sample of annual reporting on CSI 800 index listed companies between 2005 and 2007. The empirical analysis is started from two aspects. On the one hand, the internal market is divided to five sub-market, then the passage uses regression analysis on five different sub-marcket respectly to obtain the conclusion: the existence of internal marker is significantly and positively related to earning quality,the size of trade in internal product market is significantly positively related to earnings quality, the size of trade in internal capital market is significantly and negatively related to earning quality, other sub-market is slightly and negatively related to earnings quality of listed companies. On the other hand, the passage uses regression analysis separately on position which is classified into buyer and seller in internal market trade to obtain the conclusion: when a listed company is the seller, it will have a significantly and positive role on earning quality, when a listed company is the buyer, it will have a slightly and negative role on earnings quality. Finally, this article puts forward four pieces of proposals on the basis of above theoretical and empirical anlysis.