Empirical Research And Earnings Management For Public Institutional Ownership

Earnings management, a common phenomenon for public companies in our country, usually reduce the quality of accounting information as well as mislead many investors’ investment decisions to a certain extent. However, the experience from western developed countries show that institutional investors can optimize company’s governance and reduce the level of earnings management. In order to improve the listed company’s current governance and restrain the listed company’s behavior of earnings management, related securities take lots of measures, and one of the most important measures is to vigorously develop institutional investors. So far, the institutional investor has become one of the indispensable important strength of capital market in China. However, due to the particularity of our country system and legal environment, institutional investors can improve the governance of listed companies, to inhibit the action of the earnings management or not has yet to be validated.on the basis of predecessors’ research, combining with the theory of corporate governance and selectivity of accounting standards, this paper puts forward four theoretical hypothesis. We make a selection of listed companies from2009to2011as sample data and use multiple linear regression method to test our hypothesis.The results show that the institutional investors can inhibit the earnings management behavior of listed companies to a certain extent, especially when the agencies increase the length of investment period. However, the increasing in the number of institutional investors in listed companies, will not reduce the level of earnings management. In addition, compared with state-owned enterprises, institutional investor’s inhibitory effect is more effective in non-state enterprise. At the end of this paper, we put forward some suggestions to the institutional investors and relevant government agencies in combination with the results of our study.