An Study On The Influence Of Institutional Investors On Earnings Management

The earnings management is always focused in the capital market in China.It is difficult to truly reflect the operating results and financial conditions of the enterprise by manipulating earnings information,thus it will reduce the quality of accounting information,seriously misleading investors to make decisions and damage the interests of investors and interfere with the normal operation of the capital market.In accounting theory research,earnings management can be divided into accrued earnings management and the real earnings management.Roychowdhury(2006)and Cohen et al.(2008),etc.view earnings management from accrued earnings management extended to the real earnings management through the study of real earnings management which makes the research on manipulating the surplus closer to actual business.Now more and more evidence shows that the listed companies tend to implement real earnings management.As the fulfillment of the accounting standards and the fulfillment of the legal system,the surplus space of the listed companies is more and more smaller through the accrued items manipulation.More and more companies tend to take earnings management by concealing real activities.Real earnings management can distort the companies' normal business activities and change its operating cash flows which is not conducive to the realization of the company's long-term value and will lead to serious economic harm.In recent years,China ' s capital market develop gradually.The stake of institutional investors,the size and type develops year by year.The institutional investors now have replaced retail which has gradually becocome an important subject of investment in the A share stock market.At the same time,In the corporate governance mechanism,institutional investors as the important role played by the external mechanism,has caused theorists,supervisors and policy makers of great interest.At present,about the relationship between institutional investors and earnings management,domestic and foreign scholars have conducted a lot of research and achieved abundant research results.However,in the existing literature,the vast majority of scholars research the relationship between institutional investor and earnings management are based on accrued earnings management,but as more and more listing Corporation using real earnings management to manipulate profits,need to supplement the researches of other scholars,therefore,this article researches the influence that institutional investors to earnings management from the angle of the real earnings management.This paper reviewed on the basis of the principal-agent theory,asymmetric information theory,stakeholder theory and other related documents,deeply analyze the impact of institutional investors holding or not,the level of shareholding ratio to the real earnings management of the listing Corporation,and further divide the institutional investor into two categories,namely,the type of pressure resisting and the type of pressure sensitive,Deeply study the relationship between the institutional investors and the real earnings management,when the type of pressure resisting or the type of pressure sensitive holds more stock,thus put forward the research hypothesis.In the process of empirical study,this paper selects the listed companies in 2587 of 2010-2012 of China's Shanghai and Shenzhen A shares as the research sample,descriptive statistics were calculated for each variable in the research sample,the relationship between each variable analysis of correlation analysis and multiple regression analysis,through the empirical study on the relationship between China's institutional investors and real earnings management of listing Corporation.First of all,this paper will divide 2587 Sample Firms into two independent contrast sample,the experimental group is 2430 listed companies including institutional investors,the control group is 157 listed companies excluding institutional investors,to research the influence of institutional investors holding to the real earnings management of listing Corporation by the Mann Whitney rank test.The result shows that real earnings management degree of the listing Corporation with institutional investors was significantly lower than the degree of earnings management of listing Corporation without institutional investors.Secondly,this paper empirically tests the relationship between the share ratio of the institutional investors and real earnings management in the listing Corporation.The study found that the improvement of proportion of institutional investors can significantly reduce the degree of real earnings management in listing Corporation.Thirdly,this paper divides the institutional investors which based on the existence of actual or potential commercial relations with the enterprises invested,institutional investors will be divided into the type of Pressure resistance institutional investors and Pressure sensitive institutional investors,with an empirical test of correlation between different types of institutional investors and the real earnings management degree of listing Corporation.The study found that,when Pressure resistance institutional investors holding more stock,can significantly reduce the degree of real earnings management of listing Corporation;when Pressure sensitive institutional investors holding more stock,improve the degree of real earnings management of listing Corporation.Finally,summarizes the research conclusion,puts forward relevant policy suggestions and the further research direction:when the Chinese government develop the scale of institutional investors,must also pay attention to the promotion of quality of institutional investors,to improve and standardize the legal laws and the relevant policy of the establishment.management and operation aspects of institutional investors,to promote the diversified and hierarchical development of China's institution investors.