Research On The Ownership Concentration And The Governance Effect Of Institutional Investors

Earnings management is a series of behaviors that managers or controlling shareholders influence earnings information in various ways in order to gain their own interests and mislead stakeholders.It leads to the distorting of the information of decision-making by external stakeholders,which makes them deviate from the optimal decision of the original intention,thus hindering the effective functioning of resource allocation of capital market.It is necessary to curb earnings management in order to avoid the passive impact brought by it.In 1999,the CSRC made a strategic decision on the "extraordinary development of institutional investors",which makes the academic and practical community began to pay close attention to and highly expect this emerging force.However,whether they can effectively curb earnings management and take the responsibility of corporate governance has gained mixed academic conclusions.Some scholars believe that because of the prevalence of speculation and the existence of supervision costs,institutional investors seldom take the initiative to participate in the corporate governance,and will not actively supervise earnings management behavior.But other empirical studies point out that higher shareholding ratio limits the liquidity of its holdings,which forces the institutional investors pay close attention to and effectively suppress the earnings management activities which could damage the value of the enterprise and their own interests,thus affirming the supervisory and governance role of institutional investors.Ownership concentration,as the internal governance mechanism,determines the allocation of enterprise control rights,and provides a specific equity environment for institutional investors.The largest shareholders,on the one hand,serve as the main supervisory force to check and balance the management.However,the excessive concentration of rights inevitably breeds the ambitions of large shareholders.They change from the supervisor role to the predator role in order to achieve private benefits.The concentration of ownership is often the decisive factor in what role they play.The role of supervisor played by major shareholder provides a good environment for institutional investors to participate in corporate governance,while the role of predator played by major shareholder will limit the effect of institutional investor's governance.Therefore,institutional investors will have different effects on Earnings Management under different ownership structure.Based on the above background,this paper based on the agency theory and information asymmetry theory theoretically analyzes and empirically examines the governance effect of institutional investors from the perspective of earnings management,and studies the impact of equity concentration as a regulatory variable on the effectiveness of institutional investors in restraining earnings management.This paper is divided into five parts.The first part is an introduction,which mainly introduces the background and significance of the topic,research objectives,research content,research methods and research framework.The second part is the literature review.This part mainly reviews the related literature on institutional investors and corporate governance,ownership concentration and ownership governance as well as ownership concentration and governance effect of institutional investors.On the basis of summing up previous studies,this paper will inspire further research in this paper.The third part is theoretical analysis and hypothesis.This part firstly defines the related concepts of earnings management and institutional investors and expounds the theoretical basis of this paper.Then,this paper analyzes the inhibition mechanism of institutional investors on earnings management,and combs the mechanism of ownership concentration as the moderator variable on the governance effect of institutional investors.Finally,according to the theoretical deduction,this paper puts forward the hypothesis of this study.The fourth part is empirical test.This part sorts the sample data,designs the models of research hypothesis,defines the variables in the models,conducts the descriptive statistical analysis and correlation test of the selected sample,as well as regression analysis.From the regression results,we get the conclusion.Finally,the robustness test is carried out.The fifth part is the summary.According to the regression results,this paper summarizes the research conclusion,puts forward the corresponding countermeasures and suggestions,and expounds the innovation and shortcomings of this article.Through the empirical test,this paper draws the following conclusions:First,the shareholding ratio of institutional investors is significantly negatively related to the level of accruals earnings management and real earnings management.When the total sample is divided into two groups according to the shareholding ratio of institutional investors,The negative correlation between the ownership ratio of institutional investors and the real earnings management was significant in the two sets of samples,while the negative correlation between the proportion of institutional investors and accruals earnings management is no longer significant in the sample group with lower proportion of institutional investors.Second,the ownership concentration affects the relationship between institutional investors and earnings management.After dividing the population samples into three groups of sub samples,which are highly concentrated,moderately concentrated and highly dispersed,according to the concentration of ownership,the results show that the shareholding ratio of institutional investors is most significantly negatively related to the level of accruals earnings management and real earnings management in the moderate equity concentration samples.This paper has carried on the following expansion and innovation:First of all,the research on institutional investors restraining earnings management has achieved fruitful results at home and abroad.However,the constraints on the effectiveness of institutional investor governance have not yet been developed.This paper theoretically analyzes and empirically tests the influence of ownership concentration on the governance effect of institutional investors,which makes up for the shortcomings of previous studies.Secondly,this paper integrates accruals and real earnings management into the same framework,which is helpful to find out the commonness and difference of the two types of earnings management factors,so as to make more objective consideration to the institutional investors'governance effect evaluation.Finally,this paper controls the endogeneity between institutional investors and earnings management by establishing a simultaneous equation model.