An Empirical Analysis On Earnings Management Of Listed Companies With Meager Profits

With the development of our country securities market, the phenomenon of earnings management is existent commonly. The extensive existence of earnings management severely aggravated the quality of financial information. The modified earnings information is not able to fairly reveal the financial situation and operating performance, meanwhile, it makes the information less valuable in decision making. This does not only destroy the benefits of information users, but also ruin the optimal allocation of social resources. Under the background of our security market, those companies with small profits in their reports are most likely to be considered earnings management involved. The reality of those listed companies'account earnings is doubtful, which makes the specific study for the action of earnings management more necessarily. This article positively studies those companies with small profits about 2006 and comprehensively analyses the figure of earnings management activities.Firstly this article points out the characteristics of the research on the basis of recalling results of the action of earnings management at home and abroad. Secondly the article introduces the theories of the earnings management, and pointed out that the earnings management meager profit motive and means. Thirdly the article is for positive analysis on earnings management of company with small profits. This paper utilizes the vertical-square diagram method of earnings frequency distribution to analyze ROE of total A stock listed companies about 2006,to verify whether the companies with small profits in the sample period exist earnings management, which finds that there is unusual lower value in the interval around zero point. It proves that those companies with small profits actually widely exist some earnings management. Through the T-testing method dealing with non-recurring items of companies with small profits, this article finds that they are the major methods of earnings management. Nevertheless although the supervision is intensifying, still non-recurring items play a chief role in the adjusting of profit in companies with small profits and analysis of the impact of earnings management about the new accounting standards on the meager profit of listed companies means. Finally on the results of the research, the author offers suggestions on regulating the action of earnings management.