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Listed Companies' Earnings Management Research: Sino-us Perspective

Posted on:2003-03-08Degree:DoctorType:Dissertation
Country:ChinaCandidate:F GaoFull Text:PDF
GTID:1116360065462046Subject:Business management
Abstract/Summary:PDF Full Text Request
Earnings management (EM) is an lssue central to e111plrical accounting researchln USA in tl1e last 20 years EM occurs when managers use judgment in financialreporting and in structuring transactions to a]ter financiaI reports either to misleadstakeholders about the underlying econo111ic performance of the company or toinfluence contractual outcomes that depend on reported accounting numbers. Theempirical research in EM forthers the acaden1ic thoughts of accrual-basis accounting,hastens the development of Generally Accepted Accounting Principles, and enrichesthe research measures in empirical accountingLots of literatures on EM have been reported rece11tly However, researchereshaven't reached the consensus in most issues in this fieId Much of the controversyover the interpretation of the literature's tindings is due to the extensive use ofaggregate accruals models that mostly origil1ated from Jones mode1 Given the limltedtheory, we have of how accruals behave in the absence of discretion, the task ofidentifying and controlling for potentially correlated o111itted variables is dauntingindeed An alternative to study aggregate accruals is the 111ethodology fOr identifyingearnings management developed by Burgstahler and Dichev (l997) based on thedistribution of earnings after management However, this measure is flawed by itssilence about the form and extent of earnings management My dissertation intends tobridge the traditional aggregate accruals models and the new earnings distributionmethod, which is the first aim of this paperThere is no doubt that earnings management is more rampant in China whencompared with what has been documented fOr the west, since China's accountingstandards are much too incomplete to of lbr clear guida11ce on many accountingtransactions. EM in IPO, in getting qualification for right issue and in loss companiesis quite easy to detect from China's listed companies Howevef, the research is verylimited in China and we also want to make contribution to it through this dissertationln the first chapter, we clarify the detinitions of EM and generalize the EMresearch in China. Different sources of incentives fOr EM in USA and China arerespectively discussed in the second chapter The third chapter discusses trade-offSassociated with three research designs comn1only used in the EM literatures Chapterfour presents a newly developed empirical research design for EM, calledJones-threshold model, and the model is applied to tl1e USA listed c()mpaniesChapter five overviews some empiricaI research resuIts in China's Iisted c()mpaniesChapter six discusses the commonly used means of EM i11 USA and China. Chapterseven develops the EM discussion tlirther by associating EM and informationdisclosure in China.Our contribution to the documents is the introduction of Jones-threshold model, a new research measure, to this field The combination of traditional aggregate accruals model and prior earnings distribution approach shows the advantages of prior distribution approach while more accurate and persuasive. Besides, the incentive of earnings management and the specific methods that are used to manage earnings can be investigated. Abound results in aggregate accruals can be used as well. The successful application of Jones-threshold model to USA-based listed companies certifies this.However, the application of the new model to China's listed companies is limited because the financial database is not available. We couldn't testify our assumptions through empirical research there...
Keywords/Search Tags:earnings management, Jones-threshold model, earnings distribution, initial public offerings, right issue, loss companies
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