The Study On The Motivation Of Accounting Errors Of Listed Companies In China

This paper studies the incidence and correction of accounting errors, which are taken as a means of earnings management by the listed companies. It firstly introduces the conception and principle background of accounting errors and its correction and analyzes the type and motivation of accounting errors in terms of earnings management. It explores into the reason and motivation of overstatement errors with all "A"shares as samples, which made correction of accounting errors in their annual financial reports from 1998 to 2003. The treatment group of this study consists of 131 listed companies, which announced the sum of net profit influenced by making error correction. The sample is chosen after the adjustment of the errors of all the samples. Based on the theory of earnings management, contract and corporate governance, the hypothesis of the motivation of accounting errors is proposed including eight variables, such as ratio of earnings increasing, leverage, scale of the company and independent auditing etc, and two control variables. Through the statistics of the magnitude of accounting errors, there comes the result that not only the amount but also the magnitude of errors of companies who made overstatement errors is much more than those made understatement errors. Through one by one matching between research samples and controlled samples, mean value test, signed-rank test and Logistic regression, it uncovers that overstatement errors have distinct motivation of earnings management. Those companies more likely to make overstatement errors are characterized by loss in the year, limited scale, higher leverage etc. At last, the paper puts forward several suggests about how to prevent the listed company from making accounting error correction to conduct earnings management.