An Empirical Study On Managerial Risk Preference Variety And Earnings Management

In recent years, with the development of behavioral finance and behavioral corporate finance theory, many scholars are attracted to study the effect of managers'irrational behaviors on corporate financial decisions. But it is still in the fledgling stage to study the managers'irrational behaviors and the effect on corporate earnings management from the perspective of risk preference. Given that there is no unified theoretical standard to estimate whether he/she is risk-averse or risk-preferred, this paper empirically studies the effect on managerial risk preference variety to earnings management of listed companies.Take the Chinese companies listed in Shanghai and Shenzhen between 2007 and 2009 as research samples. First, from managers themselves and companies two aspects to select relevant indicators, and use model of principal component analysis to calculate the managerial risk preference and then make further efforts to study the managerial risk preference variety; Second, apply the modified Jones model to measure the extent of earnings management; At last, establish the multiple regression model to examine the effect on managerial risk preference variety to Earnings Management.Empirical analysis shows that there is a significant positive correlation between the managerial risk preference variety and earnings management. After dividing the managerial risk preference into strengthened and weakened two groups on the basis of type of variety, further studies shows that:compared to strengthened managerial risk preference, the managers with weakened risk preference have a more powerful performance on earnings management.