Corporate Sustainable Development from the Perspective of the Effect of Institutional Investors’ Shareholding on Earnings Management

Shuo Zhao and Yang Zhao ()
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Shuo Zhao: Institute of Industrial Economics, Chinese Academy of Social Sciences, Beijing 100006, China
Yang Zhao: Business College, Beijing Open University, Beijing 100081, China

Sustainability, 2023, vol. 15, issue 2, 1-13

Abstract: To investigate the mechanism of improving corporate sustainable development, this paper uses the sample data of Shanghai and Shenzhen A-share listed companies between 2008–2017 and empirically investigates the effect of institutional investors’ shareholding on earnings management under sustainable development background. The results show that this shareholding significantly increases earnings management. After controlling the negative impact of earnings management on institutional investors and conducting GMM regression analysis, the shareholding and earnings management still present a significantly positive relation. Compared to unstable institutional investors, stable institutional investors have a relatively more effective supervision influence. This phenomenon indicates that China’s institutional investors do not effectively supervise the earnings management of listed companies. The research in this paper provides suggestions for the Chinese government to promote better corporate sustainable development policies in the capital market, such as improving the evaluation mechanism of institutional investors, further increasing other external supervision measures besides institutional investors for China’s capital market and encourage more stable institutional investors to participate in the capital market to reduce earnings manipulation.

Keywords: sustainability; institutional investors’ shareholding; external supervision; earnings management; unstable investors (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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