Earnings Management Under Pledge Of Controlling Shareholder’s Equity Research

Equity pledge is a financing act conducted by a pledgor with the equity held by itself as the pledge object.The equity pledge of a listed company is a means by which the controlling shareholder pledged the equity owned by the controlling shareholder to a financial institution such as a bank to raise funds.As an emerging financing method,equity pledge has the advantages of simple operation and good liquidity.Therefore,it is favored by listed companies.At present,in China’s capital market,the phenomenon of controlling shareholders’ financing through equity pledge is increasing.Although the equity pledge brings good convenience to the listed company,at the same time,the risk also exists.First,the stock price is an important indicator to determine the amount of financing funds.Under the condition that the number of stocks is constant,the higher the stock price,the more the funds are obtained.More,so it is very important to raise the price of the stock before the equity pledge.Secondly,after the equity pledge,the stock price must remain at a high level.Once the decline hits the liquidation line,the controlling shareholder will face the risk of losing control.Therefore,for the controlling shareholder,it is extremely important to keep the company’s stock price before and after the equity pledge.Therefore,the controlling shareholder will implement the earnings management method and improve the company’s operating status to achieve the maximum benefit.However,in the long run,this kind of earnings management behavior may be It will damage the interests of the pledge and the listed company itself.Therefore,analyzing the earnings management behavior under the pledge of controlling shareholders’ equity has certain theoretical and practical significance for the regulatory agencies and the company.Based on this background,this paper uses the literature research method and the case study method to study the earnings management behavior under the equity pledge.This paper takes Colin environmental protection as a case,combined with the control right private,information asymmetry theory to the controlling shareholder equity pledge under the surplus The management change mechanism was studied to analyze the earnings management behavior under the pledge of Colin Environmental Equity and the impact on the performance and market value of Colin Environmental Protection.Finally,some normative thinking suggestions are put forward in a targeted manner.The study found that the top five shareholders of Colin Environmental Protection Co.,Ltd.conducted a large proportion of equity pledge in 2016.After analyzing the financial status and company operation of the three years before and after the equity pledge,it was found that Colin Environmental Protection had certain earnings management behavior before and after the equity pledge.In order to obtain high financing funds before pledge,Colin Environmental has adopted a real surplus management tool for disposing of assets,which will substantially increase profits and increase stock prices.After the pledge,the company’s accounting surplus will be improved by adjusting the proportion of accounts receivable bad debts.In response to the behavior of controlling shareholders’ earnings management,in order to regulate the market order and reduce the risks of stakeholders,relevant suggestions were made for the regulatory authorities and listed companies.The research on earnings management behavior under equity pledge can improve the quality of accounting information of listed companies,enable investors to make scientific decisions and promote the healthy and mature development of China’s capital market.