The Influence Of Ownership Concentration On Earnings Quality And The Mediating Effect Of Internal Control

Accounting surplus has a high content of information,which is the basis of contract signing and execution,and can have an important impact on stock price,compensation contract,debt contract and bankruptcy prediction.However,at present,financial frauds occur frequently in Chinese capital market,and the earnings quality of listed companies is not high.To this end,Chinese government regulatory authorities have issued a series of laws and regulations in order to improve the earnings quality of listed companies by legal means.However,in spite of this,financial fraud activities in China's capital market are still repeatedly prohibited,so it is necessary to explore effective ways to improve the earnings quality of listed companies from the perspective of corporate internal governance.This paper focuses on the influence of ownership concentration on earnings quality in corporate governance.In addition,this paper also introduces internal control as a mediation variable into the relationship between the two in order to open the “black box” of how ownership concentration affects earnings quality.Firstly,this paper systematically sorts out and summarizes relevant literatures in this field.Then,this paper discusses the influence of ownership concentration on earnings quality and the mediating effect of internal control when major shareholders are in different control positions by using the hypothesis of incentive effect and defensive effect of major shareholders,control right theory,principal-agent theory and fraud triangle theory.Finally,this paper takes the data of Shanghai and shenzhen a-share listed companies from 2010 to 2018 as samples,divides the samples into two groups according to whether the shareholding ratio of the largest shareholder is more than 50%,and conducts an empirical study on the relationship among the three by using the causal steps approach.On this basis,this paper also further examines the differences in the mediating effect of internal control in companies with different property rights.The findings are as follows:(1)When the majority shareholder is not absolutely controlled,the increase of ownership concentration will make the majority shareholder show "incentive effect",and ownership concentration is positively correlated with earnings quality.When the majority shareholder is in the absolute control position,the increase of ownership concentration will make the majority shareholder behave as "defense effect",and the ownership concentration is negatively correlated with the earnings quality.(2)Ownership concentration can have an important impact on the design and implementation effect of internal control.In the case of non-absolute control by major shareholders,ownership concentration can promote the effectiveness of internal control.However,when major shareholders are in absolute control,ownership concentration will inhibit the effectiveness of internal control.(3)Internal control is an important intermediary variable in the process of ownership concentration influencing earnings quality,and plays a mediating effect in the influence of ownership concentration on earnings quality.(4)The mediating effect of internal control is significantly different among companies with different property rights: compared with state-owned companies,the mediating effect of internal control of non-state-owned companies is stronger.Based on the above conclusions,this paper puts forward the following Suggestions:(1)the equity structure of listed companies should be optimized;(2)accelerating the improvement of the internal control system of listed companies;(3)Accelerating the reform of mixed ownership of state-owned listed companies.Innovation point of this article is:(1)In this paper,it is found that when major shareholders are not under absolute control,equity concentration can improve earnings quality by improving the effectiveness of internal control.When major shareholders are in absolute control,equity concentration can reduce the effectiveness of internal control and lead to the decline of earnings quality.(2)compared with existing studies,this paper further studies the differences in the mediating effect of internal control in listed companies with different property rights.