Earnings Management And Corporate Governance

In modern accounting reporting system, there are many opportunities for earnings management due to the localization of general accepted accounting principles. However earnings management will weaken the reliability of reported earnings. From 20 century 80th, western financial academics applied themselves to the research of earnings management. This issue has becomes one of the significant topics of today's positive accounting research. At the beginning of this century in U.S.A., there took place fake accounts events such as Enron, worldcom etc., which made the investors lose their trust and caused great fall of stock market price index. These events illuminate that there are significant short of American companies' governance system and arose anew consideration of the reasons of the American and the world. Reforms are hoped to be made rapidly to healthiness the capital market. To figure a good corporate governance system is becoming an international tide of 21 century. Corporate governance includes external governance formed by competition and internal governance consists of shareholders meeting, board of directors, board of supervisors and managers. Outside, China has not set up a developed and running normatively stock market and the managers market has not developed yet. Inside, there are owner lack phenomena in state-owned companies. The inter-restriction system required by the Corporation Law is far-off its function. The Chinese corporate governance framework is following that of western countries. If it fits for Chinese listed companies need to be proved by practice. According to theories of corporate governance, the corporate governance structure is responsible to the quality of financial information. Therefore to prevent the deluge of earnings management, the corporate governance must be consummate.Now researches on earnings management in China mainly focus on those on the occasion of supervising requirements. Reviewing national and abroad researches, either in corporate governance or in earnings management, there are few systematic and deep researches on the relationship between earnings management and corporate governance. This is why this thesis selects this subject for research. The thesis does a positive research on the relation between earnings management and corporate governance, finds out the corporate governance factors that induce earnings management and points out the effect of earnings management on economic resources allocation in order to criterion listed companies' governs, control earnings management and help accounting principles setters and security market supervisors to evaluate the popular of earnings management and the authenticity of financial reports at whole.The thesis first does a systematic summaries and combing on theories of earnings management and explains earnings management with agency theory, economics of property rights and information economics. And analyzes the reason of earnings management from the aspects of corporate governs, the public product character of accounting information, un-perfect contact, the law system, attribute of accountancy, external oversee system. The thesis summarizes the motivations, types and means of earnings management.Doing positive research on earnings management can not be independent from models of earnings management. The effect of models will influence the result of research. Therefore the thesis first develops a new model which is accord with the feature of earnings management in China, then begins with the audit opinions all five earnings management modelsare detected. It is proved that five earnings management models are suitable to Chinese accounting environment. And the new model is betteramong the five. The reason of problems in previous studies' statistic result is pointed out. At a time the thesis proves the relationship between earnings management and audit opinions by statistic analysis of earnings management distribution, univariance and multiple-variance logistic analysis. On the relationship between earni...