Influence Of Controlling Shareholders' Pledge On The Quality Of Earnings

In recent years,equity pledge as a new type of financing has frequently occurred in China's capital market.In the A-share stock market in 2017,the shares of 1,983 listed companies were pledged,accumulatively accumulating 13,458 times,accumulatively accumulating 302.02 billion shares.Most of the shareholders who pledged equity were the controlling shareholders of the listed companies.A direct consequence of the controlling shareholder equity pledge is the introduction of external oversight roles.At the same time,the external monitoring mechanism,such as regulatory agencies and auditors will become more stringent.Therefore,these changes of regulatory of the external environment has a certain influence on the earnings quality of listed companies.This article is based on principal-agent theory,information asymmetry theory,stakeholder theory,and signal transmission theory.It takes the change of external regulatory environment as an entry point to explore the impact of equity pledges by controlling shareholders of listed companies on the quality of earnings.Based on the current situation of China's capital market,this article selected China's A-share listed Company from the year 2007 to 2016,using manipulated accruals(ABSDA)as earnings quality metrics to make multiple regression analysis,and using propensity score matching methods(PSM),two-stage regression(2SLS),and surrogate variables to ensure the reliability of the results.The empirical results find that under the same other conditions,compared with the company with no equity pledge of the controlling shareholders,there is a higher quality of the companies whose controlling shareholders had pledged their stocks;the significant impact of the equity pledge of the controlling shareholder on the earnings quality is mainly reflected in the state-owned listed companies;under the same conditions,the degree of marketization will weaken the positive impact of the equity pledge of the controlling shareholders on the quality of earnings.