An Empirical Study Of Earnings Management Of The Lose Listed Companies In China

Earnings management occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of the company or to influence contractual outcomes that depend on reported accounting numbers. The extensive existence of earnings management severely aggravated the quality of financial information. The modified earning information is not able to fairly reveal the financial situation and operating performance, meanwhile causes it less valuable in decision making, therefore damages the benefit of information user so that it is unavailing to the optimal allocation of social resource. Consequently it is evidently important to study on earnings management.Under the background of our security market, those lose listed companies in their reports are most likely to be considered earnings management involved. The study object in this paper is the earnings management of the China lose listed companies. On the basis of discussing the general implication, characters and influences of earnings management, using the financial data of China A-share companies, this paper empirically investigates analyses the figure of earnings management activities and the intentionally selection of some earning management methods.First, the paper develops a new total accruals model and use discretionary accruals for measuring earning management to positively study the figure of lose listed companies' earning management. The by-product of this research shows that by making more or less discretionary accruals these companies have low earnings in the first lose year, and have high earnings before the year of first lose and in the year of make profit after loss. Second, based on the analysis of relative theory the paper restructures regression model, the results of the empirical research prove the biased for the choice on earnings management methods and non-recurring items are the major methods of earnings management. Finally, on the foundation studying in preceding paragraphs and the behaviors of earnings management of the loss listed company in China at present, the paper gives some policy suggestions to restrain the behavior of earnings management of this kind of companies.