The earnings management study under the separation of the control rights and the cash-flow rights

This paper focuses on the effect of the degree of separation between the control rights and the cash-flow rights has on the earnings management of Chinese listed companies. Our analysis and empirical data show that under the effective control of shareholders, as the degree of the separation increases, the more sever the earnings management behavior and the lower level of disclosure in the earnings information. The controlling stockholders who possess the specific information can exercise their control out of self-interests through the use of Stock Pyramids and Cross-ownership ties to increase the opacity of the company and to gain extra profits for themselves.