An Empirical Study Of Earning Management With The Asset Depreciation Of Accounting Policies

In view of the phenomenon, which some listed companies engage in earning management making use of the asset depreciation of accounting policies, like playing "figure game", the new "Accounting Standards", which implementing in listed companies firstly at January 2007, made major changes and improvements to the asset depreciation policies. But its impact on the earning management remains to be demonstrated theoretically and awaits further tests after the fact. What extent listed companies use specific asset depreciation to manage earnings? Whether new accounting policies restraint listed companies of earning management? How to go a step further to improve the asset depreciation of accounting policies? It is the thinking on these issues to be the motivation of this research.Documents from the study abroad show that the researches on existence and motivation of earnings management are relatively complete, so do the researches on the relationship of asset depreciation information and share prices. The research process of earnings management in home accounting field is divided into two main stages: 1.study on four items depreciations; 2.reseach on eight items depreciations. They mainly study the existence and motivation of earnings management, and made preliminary exploration of the effect which the specific market environment act on earning management. But these researches is not deep enough, particularly the literature regard to the study about eight items depreciations. At the time of the new accounting standard carrying into effect firstly in listed companies, it has academic interest to study the extent of specific item depreciation to earning management, and to demonstrate whether the new accounting policies constraint listed company of earnings management behavior.This paper attempts to study the earnings management with asset depreciations theoretically and empirically, focusing on discussing the possibility of earnings management under new asset depreciation policies, and demonstrating its impact on earning management through analyzing empirical research data and correlation between net profit and specific asset depreciation.This paper is divided into six parts: the first part is an introduction outlining the background, purpose and significance of this research ideas; the second part is about the literature review on research founding of Chinese and foreign scholars about earning management, and make brief comments; The third part is the basic theory of assets depreciation and earnings management, briefed the basic theory and asset depreciation policy development process, and analyzed earning management's motivation and possibility using asset depreciation; PartⅣis about new asset depreciation policies and earnings management, elaborated the restraints and the possibility of earnings management under new policies; PartⅤis empirical research on earning management using depreciation write-off; PartⅥis the conclusion, recommendations and limitations of the study.The innovation in this paper is to statistically analyze the effect which the regulation- confirmed loss of asset depreciation, not write-off in the subsequent accounting period, will impact on earning management. First, counted the ending balance, the depreciation and write-off in the current period from 2003 to 2005, and analyzed the possibility of earnings management with new accounting policies. Second, choose the companies, which become profit in this year but were at a loss last year between 2003 and 2005, as a sample, and analyzed the extent which those companies made use of specific asset depreciation to earning manage, and whether new accounting policies will constraint of earning management by calculating coefficient of correlation.Research conclusion: Overall, the provision of bad debt and stock write-down of listed companies occupies a higher proportion of the amount; among those sample, the main write-off items is the depreciation of bad debt, inventory and fixed asset, but the new accounting policy only limited the 38％portion of the total not to write-off; From the correlation coefficient analysis, listed companies mainly write off the provision of bad debt and stock writ-down to earning management, aiming to become profit. Therefore, the provision of bad debt and stock write-down will be the main means of earning management under new accounting policies.Finally, from the perspective of limiting earnings management in listed companies to suggested: combination of qualitative and quantitative requirements, and reduce the subjectivity of the new asset depreciation policy; limit selectivity of the asset depreciation policies; further improve the operational and scientific measurement of the amount recoverable; allow the provision of asset depreciation to write off under given conditions; disclosure of information integrity, transparency and critical.