Empirical Study Of Earnings Management In Chinese Listed Firms

ST and delisting mechanism are the standard established by China Securities Regulatory Commission for preserving Chinese stock market in order to limit the circulation of listed firms with worse financial condition. However, due to the faults of our stock market, many listed firms take the way of earning management to adjust the level of earning for benefiting themselves. According to it, this paper research whether the behavior of earning management makes the influence to our distribution of resources.There are some arguments about the definition of earning management. So, the paper explores the background of the system and the ways to make the earning management, after giving a clear definition. In base of theory analysis and the assumption that the earning management makes the influence to the market, a game model about CSRC and listed firms is founded to find the solution of Nash equilibrium of mixed strategies under a static game model with complete Information and sub game perfect Nash equilibrium under a dynamic game model. The paper conclude that the CSRC optimal strategy is to take the measures first that they strengthen the intensity of checking and punishment.The data of listed firms from 2002 to 2006 was used to take an empirical analysis. First, they are divided into two groups according to the level of earning and put in the Jones mode. The test results show that the firms from a loss to profit have a higher trend to earning management. Moreover, the whether the firms make earning management as the dependent variable and the income, the costs, the investment income, the operating profit or loss, the depreciation as independent variables are embedding in the regression model and we identify three factors of the income, the operating expenses and the operating profit or loss have possibility to be the tool to earning management. Finally, the paper compare with the financial index of the two groups of samples, a significant difference is found and the results confirm that the earning management maybe makes the influence to the distribution of market resources, so the supervision department should take the measures to stop the behavior. Finally, the conclusion summarizes the researching achievements of this paper and gives some suggestions. I hope to do some help for promote the maturity and development of Chinese stock market.