Study On The Relationship Between The Reduction Of Major Shareholders And The Management Of Earnings Using Real Activities Manipulation

After the completion of Non-tradable Shares Reform,the major shareholders of listed companies reduced their shares frequently in China's A-share market.Holding a large proportion of shares,major shareholders may manipulate the information before their reduction of shares using their control rights of the company so that they can optimize the interests coming from the reduction.Such behavior seriously infringes the interests of small shareholders and thus obstructs the capital market from developing.Earnings management can modify corporate earnings information and is frequently used in information manipulation by listed companies.Did the major shareholders use earnings management before their reduction to gain more profits?Based on the Principal-Agent Theory and Value Investment Theory,this paper studies the relationship between the major shareholders' reduction,institutional holdings and the listed companies' real earnings management.Furthermore,this paper makes an empirical study on the unbalanced panel data made of both the sample in which the major shareholders reduced their shares and the sample in which the major shareholders didn't reduce their shares in China's Ashare market from 2009 to 2016 and then find out what influences the major shareholders' reduction and institutional holdings have on the companies' real earnings management respectively.At last,using the cross term of the major shareholders' reduction and institutional holdings,this paper explores their interactive effect to the companies' real earnings management.Conclusions in this paper are as follows.Firstly,the major shareholder's reduction of shares aggravates the real earnings management in listed companies and the more he reduces,the more real earnings management increases.Secondly,fund shareholdings can significantly restrain the real earnings management in listed companies and however,there is little evidence proving that security companies and trust holdings can curb the real earnings management.Thirdly,there is insufficient evidence to show that the major shareholder conspired with the institution to manipulate the earnings information before his reduction.Fourthly,the larger the asset size,the higher the asset-liability ratio and the worse the performance,the more likely listed companies will carry out real earnings management.