Quarterly Distribution Characteristics Of Earnings Management In China's Listed Companies

Earnings management is an important research topic on financial accounting theory, and also concerned by accounting standards setters and securities market regulators. The existing researches on earnings management are mostly based on annual accounting earnings; topic on earnings management in interim accounting report is seldom deeply studied. Based on analysis and test to the quarterly distribution characteristics of earnings management in China's listed companies, this dissertation is to reveal listed companies' interim earnings quality and main effecting factors, thereby provide certain reference for China's accounting standards setting and interim accounting information supervising.Unlike most of current researches about earnings management, which paid most attention to analysis the motivations and proved the existence of earnings management, often neglected opportunities analysis of earnings management, this dissertation analyzed the causes of quarterly distribution characteristics of earnings management meanwhile from two dimensions of opportunity and motivation. Through the investigation of company sample listed on Shanghai and Shenzhen Stock Exchange during 2003-2008, this dissertation found that quarterly distribution characteristics of earnings management of Chinese listed companies are obvious. Generally speaking, earnings management in the fourth quarter is significantly different from that in the first three quarters.In order to further corroborate the influence of contract and capital market motivations, and audit factor that reflect an important opportunity of earnings management, this dissertation also analyzed and tested quarterly distribution characteristics of earnings management in three specific circumstances:annual loss, seasoned equity offering and interim audit. The conclusion is that main reasons why listed companies manage their earnings are motivations of earnings management; the restraint effect of auditing is very limited.From nature, earnings management contained both the component of opportunism and "good" aspect, through which management can signal their private information. By analyzing and testing the value relevance of discretionary accruals, which is one of components of earnings, this dissertation compared the difference of earnings management in nature between first three quarters and the fourth quarter. In accord with our expectations, discretionary accruals of interim earnings contain more private information transmission components, and discretionary accruals in the fourth quarter contain more opportunistic components.Overall, earnings management in interim financial report is not very serious in Chinese listed companies in spite of deficiency of audit and other control measures. Under normal circumstances, it is not necessary to impose listed companies to have their interim report audited; however, under the circumstances of capital market motivation, such as seasoned equity offering, it is necessary to strengthen supervision to the quality of listed companies reported information disclosure. As for the accounting standards formulating, interim financial report may aptly emphasize integral view principle, in order to improve the relevance of the accounting information.