Author(s)

Mingxuan Wu ¹

Affiliation(s)

¹ Lomonosov Moscow State University, GSP-1, Leninskie Gory, Moscow, 119991, Russian

Corresponding Author

Mingxuan Wu

ABSTRACT

The financial fraud cases exposed by domestic and foreign listed companies have exposed the fragility of the internal control system of listed companies to a certain extent. How to promote enterprises to carry out reasonable earnings management activities is particularly important. This paper takes the non-financial A-share listed companies involved in 2016-2020 as the research object to conduct a comprehensive analysis, studies the relationship between internal control quality and earnings management, and summarizes the adjustment of corporate ownership structure to the two effect. Research shows that: the quality of internal control is negatively correlated with earnings management, that is, good internal control will constrain real earnings management activities; the degree of ownership concentration and the degree of checks and balances will negatively adjust the restrictive effect of internal management on real earnings management, and the internal control An in-depth study of the relationship between earnings management is not only conducive to efficient internal control of listed companies, but also to carry out reasonable and effective earnings management activities. It is hoped that it will be helpful to the improvement of the country's social and economic level and the development of the country's comprehensive national strength.

KEYWORDS

Accounting surplus; equity structure; internal control quality; earnings management; profit durability

CITE THIS PAPER

Mingxuan Wu, Research on the Relationship between Internal Control Quality and Earnings Management under the Adjustment of Ownership Structure—Empirical Analysis Based on the A-share Listed Companies in Shanghai and Shenzhen. Accounting and Corporate Management (2023) Vol. 5: 53-67. DOI: http://dx.doi.org/10.23977/acccm.2023.050608.

REFERENCES

[1] Huang Dongxiao. Research on the Connotation and Significance of Earnings Management [J]. China Science and Technology Economic News Database Economy, 2017(02): 039-00039.
[2] Qin Rongsheng. New Topic in Financial Accounting: Earnings Management [A]. Contemporary finance and economics, 2001(2): 55-60.
[3] Jeffrey T. D., Weili G., Sarah M. Accruals Quality and Internal Control over Financial Reporting[J]. The Accounting Review, 2007, 82(5): 1141-1170.
[4] Chan K. C., Barbara F., Picheng L. Earnings Management of Firms Reporting Material Internal Control Weaknesses under Section 404 of the Sarbanes-Oxley Act[J]. Auditing: A Journal of Practice&Theory, 2008(27): 161-179.
[5] Ashbaugh-Skaife H., Collins D. W., Kinney Jr W. R. The Effect of SOX Internal Control Deficiencies and Their Remediation on Accrual Quality [J]. The Accounting Review, 2008, 83(1): 217-250.
[6] Cheng Xiwu, Guan Weisheng, Li Yunyun. Research on the Relationship between the Effectiveness of Internal Control and Real Earnings Management [J]. Friends of Accounting, 2013(9): 63-67.
[7] Li Shu, Liang Yuhuan. Internal control quality, property rights nature, and earnings sustainability [J]. Audit and Economic Research, 2017(1): 24-35.
[8] Ashbaugh-Skaife H., Collins D. W., Kmney Jr W. R. The Discovery and Reporting of Internal Control Deficiencies Prior to SOX-mandated Audits[J]. Journal of Accounting and Economics, 2007, 44(1): 166-192.
[9] Rice S. C., Weber D. P. How Effective Is Internal Control Reporting under SOX 404? Determinants of the Disclosure of Existing Material Weaknesses[J]. Journal of Accounting Research, 2012, 50(3): 811-843.
[10] Chu Chengbing. The Impact of Pyramid Equity Structure on the Effectiveness of Internal Control: Based on Empirical Data of Listed Companies [J]. Journal of Central University of Finance and Economics, 2013(3): 78-83.
[11] Krishnan J. Audit committee quality and internal control: an empirical analysis[J]. The Accounting Review, 2005(80): 649-675.
[12] Hoitash Udi H., Rani B., et al. Corporate Governance and Internal Control over Financial Reporting: A Comparison of Regulatory Regimes[J]. The Accounting Review, 2009(84): 839-867.
[13] Cai Jifu. Empirical Study on Internal Control Information Disclosure of Listed Companies in China [J]. Audit and Economic Research, 2005(3): 85-88.
[14] Zhang Ying, Zheng Hongtao. Investigation and Analysis of the Effectiveness and Influencing Factors of Internal Control in Chinese Enterprises [J]. Audit research, 2010(1): 75-81.
[15] Li Yuedong, Liu Weiwei. Analysis of Factors Influencing Major Defects in Internal Control [J]. Friends of Accounting, 2014(15): 86-94.
[16] Chen Hanwen, Wang Weicheng. Who determines the quality of internal control: the chairman or the audit committee? [J]. Economic management, 2014(10): 97-107.
[17] Cheng Xiaoling, Wang Huaiming. The impact of corporate governance structure on the effectiveness of internal control [J]. Audit research, 2008(4): 53-61.
[18] Wei Fengying, Lin Aimei. Research on Factors Influencing the Effectiveness of Internal Control [J]. Financial and accounting communication, 2015(18): 87-90.
[19] Li Xiaoyan, Yang Jihua, Guo Ying. The Sarbanes-Oxley Act of the United States and the Conception of a Self-Strengthening Mechanism for Internal Control Systems of Chinese Enterprises [J]. Accounting research, 2015(2): 66-72.
[20] Yang Qizhong, Ma Jiuli. Selection of internal control and earnings management methods [J]. Accounting and Economic Research, 2014(3): 80-89.
[21] Xu Hong, Lin Zhonggao, Wang Xin. Relational Trading, Internal Control, and Earnings Management: Empirical Evidence Based on Accrual and Real Earnings Management [J]. Accounting and Economic Research, 2015(3): 57-74.
[22] Cheng Xiaoke, Zheng Lidong, Yao Lijie. Can internal controls suppress real activity earnings management —Comparison with Accrued Earnings Management [J]. China's soft science, 2013(3): 120-130.
[23] Fang Hongxing, Jin Yuna. Can high-quality internal controls suppress earnings management—Empirical Research Based on Voluntary Internal Control Assurance Reports [J]. Accounting research, 2011(8): 53-60.
[24] Fan Jinghua, Zhang Yaman, Liu Qiliang. Internal control, auditor industry expertise, accrual and true earnings management [J]. Accounting research, 2013(4): 81-87.
[25] Zhu Xiangping, Li Ao, Tang Yujie. Environmental Uncertainty, Internal Control, and Earnings Management [J] Accounting Monthly, 2016(32): 15-20.
[26] Katherine S. Earnings management [J]. Accounting horizons, 1989. 3(4). 91.
[27] Healy P. M., Wahlen J. M. A Review of the Earnings Management Literature and Its Implications for Standard Setting [J]. Accounting Horizons, 1999. 13(4): 365.
[28] Lu Jianqiao. Empirical Study on Earnings Management of Chinese Listed Companies with Losses [J]. Accounting research, 1999(9): 25-35.
[29] Bruns W., Merchant K. "The Dangerous Morality of Managing Earnings" [J]. Management Accounting, 1990, 72 (2): 22-25.
[30] Maria O. Corporate Diversification and the Cost of Capital [J]. Journal of Finance, 2013, 68(5): 1961-1999.
[31] Wang Shuzhen, Lin Zhonggao. Research on Internal Control and Enterprise Value: Empirical Analysis from A-shares in Shanghai and Shenzhen Stock Exchanges [J]. 2007(4): 132-143.
[32] Zhu Hongjun, Wang Hui. Can 'equity checks and balances' improve corporate governance—— A Case Study on the Controversy over Control Rights of Hongzhi Technology Co., Ltd. [J]. Managing the world, 2004(10): 114-117.
[33] Roychowdhury, Sugata. Earnings Management through Real Activities Manipulation [J]. Journal of Accounting and Economics, 2006, 42(3): 335 -370.
[34] Liu Qiyang. Research on the Mediation Mechanism of Internal Control on Equity Structure and Company Performance [J]. Statistics and decision-making, 2018(2): 176-181.

Sponsors, Associates, and Links

---

• Information Systems and Economics
  
  
• Accounting, Auditing and Finance
  
  
• Industrial Engineering and Innovation Management
  
  
• Tourism Management and Technology Economy
  
  
• Journal of Computational and Financial Econometrics
  
  
• Financial Engineering and Risk Management
  
  
• Social Security and Administration Management
  
  
• Population, Resources & Environmental Economics
  
  
• Statistics & Quantitative Economics
  
  
• Agricultural & Forestry Economics and Management
  
  
• Social Medicine and Health Management
  
  
• Land Resource Management
  
  
• Information, Library and Archival Science
  
  
• Journal of Human Resource Development
  
  
• Manufacturing and Service Operations Management
  
  
• Operational Research and Cybernetics