Controlling Shareholder’s Share Pledge and Real-activity Earnings Management of Listed Companies
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| Title | Controlling Shareholder’s Share Pledge and Real-activity Earnings Management of Listed Companies
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| Author | Xie Deren and Liao Ke |
| Organization | Tsinghua University |
| Email | xiedr@sem.tsinghua.edu.cn；liaok.12@sem.tsinghua.edu.cn） |
| Key Words | Share Pledge, Real-activity Earnings Management, Market Value Management, Ownership Nature; Control Rights Balance |
| Abstract | Based on a sample of Chinese listed firms during 2003 and 2013, this paper examines whether controlling shareholders’ share pledge will have impact on firms’ real-activity earnings management. We show that with controlling shareholder’ shares being pledged, firms are more likely to be involved in upward earnings management through real activities. This relation is more pronounced in non-SOE firms and in firms with weaker control rights balance. Our results suggest that, facing with the risk of possible foreclosure which may result in losing control, controlling shareholders with stock pledged might ask firms to do real-activity earnings management to boost share price. |
| Serial Number | WP1027 |
| Time | 2016-02-05 |
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