A Study On The Provision For Assets Impairment Behavior Of Loss Listed Companies In China

The assets impairment of listed companies is always the focus of scholars, enterprisers, and supervisors. Along with the development of China stock market, the Ministry of Finance have developed a series of regulations for ruling the disclosures of Listed Companies' assets impairment, which is supposed to benefit reflecting the veritable assets quality and enhancing the reliability of accounting information. However, we researched the listed companies' annual report in last few years, finding that the regulations become a tool for earnings management by some companies, especially the loss ones.In this paper, basing on the financial data of the loss listed companies from year 2003 to year 2005 in Shanghai and Shenzhen stock markets, we employ specific accrual models, and make an empirical research on provision for assets impairment and its reverser of listed companies suffering loses firstly, lasting two years continuously and lasting two years discontinuously.Then, we draw some conclusions as follows: Firstly, to prevent being specially treated, the listed companies suffering loss firstly have the motivation to earning management, which tend to accrue more provisions for assets impairment. Secondly, to prevent being kicked out from the stock market, the listed companies suffering loss lasting two years continuously have the same motivation to earnings management in order to gain profit the next year. Thirdly, the listed companies suffering loss lasting two years discontinuously tend to withdraw much more impairment in the profit year than the loss years'. In conclusion, loss listed companies manipulate earnings by using the provision for assets impairment.At last, the author put forward some proposals separately from the aspect of rule constitutors, supervisors and the external audit, which is supposed to have theoretical as well as realistic significance.