Empirical Study In Earnings Management Of Political Cost

Earnings management occurs when manager 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 economy, or to influence contractual outcomes that depend on reported accounting numbers. As an important issue in financial reporting , earnings management have been attracting the eyes of accounting researchers since 1980's. Many motivations have been put forward in the literature. These motivations include remuneration, compliance with debt covenants clause, political cost, taxes and initial public offering. Influenced by the our country unique policy and the market environmental condition, some list companis to decorates the financial report form in China, To avoid the public and the government to its special attention and the limit. This motivates the listed companies to adjust their report earnings. This article studies these list companies in the announcement report form time whether adjusts should count the income, how do they adjust these profits.Net income consists of cash flows from operations and total accruals that can be divided into discretionary and non-discretionary accruals .How to derive discretionary accruals from earnings is the key in detecting earning management. It is not possible to observe earnings management directly. Therefore, prior research has used a number of accounting accruals measures to detect earning management. These measures include random walk model, and so on. Of all the above models, it is only the Jones and section modified- Jones models who introduce the change of environment to estimation of non-discretionary accruals, and who derive effectively discretionary part from total accruals.using a sample of 294 from Shanghai and Shenzhen Stock Exchange, we found empirical evidence showing these list company in these years which inspects are the existence earning management, and we also have find them political cost. Our results indicate that entrepreneurs may seek to decrease total accruals.