Research On Earnings Management From The Perspective Of Controlling Shareholders’ Equity Pledge

In recent years,China’s macro-economic downward pressure has increased,the lack of market liquidity,for enterprises financing difficult,expensive financing has become one of the main problems facing the development of enterprises.However,with the maturity and improvement of China’s capital market,the financing methods for capital demanders are also diversified,and equity pledge is one of them.Equity pledge is favored by borrowers for its ability to provide faster and more funds to the lender without losing control of the equity,which also leads to the explosive growth of equity pledge in China in recent years.The controlling shareholder of the funds through equity pledge how closely associated with the value of the equity pledge,the higher the price,the money will be,the more so before the pledge,the controlling shareholder will have a strong "surplus manipulation" motivation,by adjusting the enterprise’s surplus,in turn,affect the stock price,in order to obtain high loan amount.In the process of equity pledge,controlling shareholders have the motivation to reduce the losses caused by stock price fluctuations through earnings manipulation for the purpose of stabilizing stock price.Therefore,it is necessary to strengthen the research on equity pledge and earnings management.This paper selects Coship Electronics Co.,Ltd.as the research object,,and uses the mean return accrual model,Roychowdhurym model and comprehensive measure of real earnings management index REM were used to measure and analyze the earnings management behavior of Coship electronic controlling shareholders after pledge of equity.Firstly,the article summarizes the studies of domestic and foreign scholars research on the pledge of controlling shareholders’ equity,the earnings management of enterprises and the mechanism of controlling shareholders’ equity pledge on earnings management.Secondly,it introduces the concepts and relevant theories related to the pledge of shares of controlling shareholders and earnings management.Based on the theoretical basis,mainly includes information asymmetry theory,principal-agent theory and incomplete contract theory.Then,based on the existing literature and theory,combined with the case of Coship Electronics,the pledge process from the controlling shareholder of Coship Electronics and Motivation and equity pledges start with the mechanism of earnings management,analyze the possible surplus management appearance,and then use the measurement model of earnings management to measure the degree of earnings management and analyze the specific methods used in the earnings management process;Finally,analyze the equity The pledge caused Coship Electronics to conduct earnings management reasons.Through the analysis,it is found that the pledge of shares by Coship electronic controlling shareholders may lead to more serious earnings management behavior of enterprises,and they are more inclined to adopt the real earnings management mode rather than accrual earnings management mode for earnings adjustment,thus leading to the decline of the company’s earnings quality.In view of the influence of the pledge of the controlling shareholders on the earnings management of enterprises,this paper argues that the government departments need to strengthen the supervision of the pledge of the shares,including the improvement of laws and regulations and information disclosure;The pledgee should strengthen the supervision of the whole process,including strengthening the pre-loan investigation of the pledgor before the pledge,adding restrictive clauses in the pledge,improving the contract terms,and conducting the investigation of the pledgor irregularly after the pledge.For enterprises themselves,it is necessary to optimize the corporate governance mechanism and attach importance to the system construction related to internal control.As this paper adopts case analysis,the individual phenomenon of an enterprise of Coship electronics may be difficult to reflect the phenomenon of the entire capital market,which is somewhat subjective and one-sided.In the future,more cases need to be analyzed and observed to obtain more convincing conclusions.