Private Equity Placement, Institutional Investor Shareholding And Earnings Management

The relationship of private equity placement and earnings management is gradually concerned by experts and scholars attention. Consider the implementation of the policy constraints without the company’s performance, Private Equity Placement does not have motivation for earnings management to achieve the refinancing conditions. But are there other motives for earnings management in private Equity Placement? Does the level of earnings management of listed companies expand before private equity placement? Research on the power of institutional investors governance at home and abroad are abundant. Part of scholars believe that institutional investors have the advantages of information and capital advantage, so institutional investor can checks and balances equity structure, improve the level of corporate governance, alleviate conflict caused by two types of agency problems, inhibit earnings management behavior of the company. However, some scholars hold different views. They think that due to the dual principal-agent relationship and the impact of their own profit model, institutional investors may exist investment myopia behavior. It greatly reduces the institutional investor actively participating in corporate governance and to inhibit the action of the company earnings management behavior. So, will institutional investors inhibit earnings management behavior before private equity placement?Based on this, this article put private equity placement as the breakthrough point, analysis the earnings management behavior before private equity placement and the inhibition of institutional investors.This article takes2010-2012private companies as research samples. This article study on specification first. In this section, the article reviewed the literature, defines the concept, analysis the theoretical basis, and on this basis put forward research hypothesis. And then empirical analysis the existence of earnings management behavior of listed companies before private equity placement and the inhibitory effect of institutional investors for it. And stand in the angle of the different secondary object, this article further inspect inhibitory effect of institutional investor to the earnings management which can be divided into different directions.The article main research results are as follows.(1) It confirmed earnings management behavior of listed companies before private equity placement.(2) Institutional investor shareholding and the degree of earnings management of listed company before private equity placement are significant negative correlation. It Show that for earnings management behavior of listed companies before private equity placement, institutional investors can effectively restrain it.(3) The inhibition of institutional investor shareholding to positive earnings management of listed company before private equity placement is not significant. (4) The inhibition of institutional investor shareholding to negative earnings management of listed company before private equity placement is significant.Finally, combined with the research conclusion, this article put forward some suggestions to alleviate the earnings management problem and standardize private equity placement of listed companies.