Empirical Study Of The Relationship Between Negative Goodwill And Earning Management Under The New Accounting Standards

Based on the sample of the listed companies with negative goodwill between 2007and2009, this paper discusses the earnings management of the listed companies with negative goodwill by using the modified Jones model. Meanwhile investigating the changes of cumulative abnormal returns after the company announced annual report containing the negative goodwill, and the stock market reaction to negative goodwill. The findings show that the listed companies compared to companies of nonnegative goodwill have a higher degree of upward earnings management. Through regression analysis, the findings indicate that positive correlation exits between discretionary accruals and negative goodwill after the negative goodwill announcement. This is demonstrated that the listed companies'discretionary accruals are higher than others. The stock market's short-term reaction to negative goodwill is negative, which is demonstrated by the negative cumulative abnormal return(CAR) after the negative goodwill announcement. Studies have shown that:the existing guidelines about goodwill left a surplus of space for management of the company. Should further improve or strengthen the supervision of the implementation of the guidelines. We should further improve or strengthen the supervision of the implementation of the guidelines.