The Revision Of Debt Restructuring Accounting Standard And Earnings Management

Development of Accounting Standard is closely related with healthydevelopment of capital market, and quality of accounting standard hasimportant effect on the capital market's function in optimizing the allocationof resources. Evidences from China's capital market have show that thedevelopment of China's Accounting Standard System is interacted withearnings management conducted by the listed companies.This paper will make empirical research on the relation between DebtRestructuring Accounting Standards and Earnings Management conducted byChina's listed companies, in order to make evaluation on the revision of DebtRestructuring Accounting Standards completely and objectively.Compared with similar researches to date, we will cover more samples,and control such other more factors as financial distress, affiliatedstakeholders and other means of earnings management besides earningsmanagement incentive. Also, we redesign variables that proxy for China'slisted companies' incentive of earnings management. Then, aimed to observedifferent companies' earnings management, we group companies that makegain from debt restructuring by degree of the gain's effect on the earningsnumber. Additionally, we review the debt restructuring of listed companiesoccurred before the former Debt Restructuring Accounting Standards.We find that listed companies have made use of old Debt RestructuringAccounting Standards for earnings management and companies with differentincentive and earnings level will show different characters in such earningsmanagement. We also find that companies with debt restructuring gain showlower efficiency in the use of capital. Based on our findings, we conclude thatthe old Debt Restructuring Accounting Standards need revising, and potentialreason for the revision may be to optimize allocation of resources.