Ultimate Controlling Rights, Cash Flow Rights And Earnings Quality

Earnings information is an important source of information for investor decision-making,as is growing in the current financial crisis of confidence,earnings quality is more essential. Different from the Anglo-American countries dispersed ownership structure,lised companies in China perform as a concentrated ownership structure,coupled with the special background of the split share structure,large shareholders controlling position is of a double insurance,the controlling shareholder as "insiders"with the motivation and ability manipulate accounting information.Unlikein the past that the article is based on the ultimate property rights theory,tracing the ultimate controlling shareholder of listed companies to study the relationship between the ultimate control rights,cash flow rights and the separation of ownership and earnings quality,and also examined the incremental effect of the split share structure reform and nature of the ultimate controlling shareholder.This paper first reviews related literatures about the ultimate controlling rights,cash flow rights and earnings quality at home and abroad,and then analyzes the mechanism of the ultimatie controlling shareholder and the relevant definition of concept of earnings quality, and then analyzes the relationship between the various aspects of the ultimate controlling shareholder and earnings quality from the principal-agent theory,incomplete contracts and economic point of property rights.and then with the institutional facts of China's split share structure reform and put forward the hypothesis of this article,providing a basis for futher empirical research.This paper selected years between 2004-2007 China's A share lised companies for the 3499 research sample,and to measure earnings quality from controlling accruals of measuremengt perspective and earnings response coefficient of information perspective, using the accrual model and earnings-return model. First of all, we test the significance of the sample group mean differences prior to the split share structure reform and the nature of the ultimate controlling shareholder respectively before regression,in order to examine regression analysis of their incremental impact;Then, from the view point of measurement, we do the single-variable analysis and multiple regression testing for accrual model; and from the point of information, we conduct the regression tests of earnings-return model. Finally, we changed measurement methods of earnings quality, carried out test of the robustness of the regression results.Through empirical study, the following major conclusions:(1) Either measure the quality of earnings, cash flow and earnings quality are the right ratio showed a significant negative correlation. Factors to consider share reform, despite the share reform to improve the quality of earnings has a positive effect, but did not pass the statistical significance level; (2) the proportion of ultimate control over the quality and earnings performance for the significant negative correlation between the ultimate controlling shareholder is not the behavior of Western scholars so-called "trench effect" to the "synergistic effect" of change, considering the incremental impact of share reform, split share structure reform were not significantly changed the behavior of the ultimate controlling shareholder; (3) separation of ownership and the control chain between the two layers in the whole sample and Earnings Quality under significant negative correlation between the performance of that separation of ownership and control chain makes the ultimate multi-stage controlling shareholders can more easily manipulate earnings, lower earnings quality; (4) according to the nature of the ultimate controlling shareholder grouping empirical test of two samples, the private ultimate separation of ownership and control samples in the regression coefficient of apparent degree of ultimate control of the sample than the state the regression shows that the ultimate state-owned company's earnings quality control samples was higher than the ultimate control of the sample of private companies; (5) in the multiple regression model, the study found that the proportion of cash flow and earnings power quality performance of the overall positive correlation between single-variable regression model obtained with the opposite conclusion, a possible explanation is that multiple regression model to identify cash flow ultimate controlling shareholder the right to manipulate earnings restraints; ultimate control over the quality of performance and earnings ratio for the significant negative correlation, univariate regression analysis with the same conclusion. Finally, the two models are a robust test, and basic maintenance of the original conclusion, this study shows the robustness of conclusions to a certain extent.The main innovation in this paper is based on the split share structure reform of the special background, examining reform of the stock before and after the cash flow and earnings power of different quality of relationship; ultimate control over the quality and earnings have always demonstrated a significant negative correlation of the empirical conclusions and possible explanations, but also also considered to control the chain of layers on earnings quality.