Study On The Impact Of China Listed Companies Shareholding Structure On Earning Management

Earning management is common in China listed companies, earningmanagement can reduce the quality of accounting earning information to some extent.The distortion of accounting earning information go against the target of financialreports and go against the interest of the users of financial report. Earningmanagement in China listed companies has taken place, because there is somedeficiency in corporate governance structure. And the unreasonable shareholdingstructure is the major factor. China listed companies have special shareholdingstructure which represents a high concentration of ownership, low equity restrictionand uncirculation of equity. The unreasonable shareholding structure induces earningmanagement behavior and create the conditions for earning management. In thebackground of unreasonable shareholding structure and the common earningmanagement, the paper research the effect of shareholding structure on earningmanagement. The shareholding structure includes ownership concentration, equityrestriction, equity circulation, the property of the largest controlling shareholder,managers’ equity and institutional investors’ equity. The target of research is that thecompany can build the reasonable shareholding structure to inhibit earningmanagement. The paper sums up the summary and suggestion.Firstly, the paper review domestic and foreign literature to find the insufficient ofdomestic research and determine the direction of the paper. On the basis, the paperanalyze the theory which include agent theory, contract theory, informationasymmetry theory, opportunism theory and property right theory. The analysis oftheory lays the foundation of empirical study. Then the paper analyze the researchstatus about shareholding structure and earning management to provide the realisticbasis.Secondly, the paper based in all A shares of listed companies in Shanghai andShenzhen from2008to2012for research and eventually get5729valid samples.Combined with the characteristics of China listed companies’ shareholding structure,the paper take ownership concentration, equity restriction, equity circulation, theproperty of the largest controlling shareholder, managers’ equity and institutionalinvestors’ equity as shareholding structure variables and take the absolute value ofrulable profit which calculated by the modified Jones model as dependent variable ofearning management. The paper use regression model to analyze the impact of shareholding structure on earning management. The research results shows thatownership concentration, the property of the largest controlling shareholder andmanagers’ equity have a positive relationship with earning management. Besides,equity restriction, equity circulation and institutional investors’ equity have a negativerelationship with earning management.Thirdly, based on the research about general impact of shareholding structure onearning management, the paper sort the data with the degree of earning managementby trisection and take the highest group as radical group as well as the lowest group asconservative group. Then the paper research the impact of shareholding structure onearning management in the varying earning management degree by group. Theresearch conclusions are as below. In radical group, ownership concentration has apositive relationship with earning management. And equity restriction, equitycirculation and institutional investors’ equity have a negative relationship with earningmanagement. In conservative group, the property of the largest controllingshareholder and managers’ equity have a positive relationship with earningmanagement. All these show that the research is convictive. In addition, the paperfocuses on the radical group. We can find that the deficiency of shareholding structurecause high degree of earning management, such as high concentration of ownership,low restriction of equity and some uncirculated equity. The paper also analyze theindustrial distribution to focus on key industry and promote the industry for thelong-term development.Finally, on the basis of empirical research, the paper gives the suggestion on thedeficiency of shareholding structure and industry distribution especially in the radicalgroup. So we can ameliorate shareholding structure and restrain the behavior ofearning management.