Research On Earnings Management Of Listed Companies Under Financial Distress

With the development of our country's capital market and increase of listed companies, more and more investors and conductors pay attention to the earnings management under special treatment. Special Treatment System is put into effect to maintain capital market operation healthily and steadily and protect the investors'interest, but presently listed companies have the motivation of earnings management, especially the listed companies under Special Treatment. According to the present research about earnings management, the article will study 72 listed companies under special treatment arising from the net income suffering losses for two years in Shanghai and Shenzhen Stock Exchange from 1998 to 2004, and analyze the earnings management comparing with the control group which has the same asset in same industry and gain the profit in that year. Based on the previous research and current circumstance about listed companies, the article will analyze whether there are earnings management before and after suffering losses or making up the deficits and get surpluses, and whether there are some special choices about the method of earnings management.The article stands in empirical aspect, explains the matter of financial distress, makes sure research topic, analyzes the opinions of earnings management and displays the theory origin of motivation about earnings management and the motivation of earnings management about listed companies under financial distress. Then the article provides the hypothesizes, analyzes the related financial data and gets the inclusions which is that the listed companies under financial distress decease the earnings by planning the devalue preparation and current accruals in first year of suffering loss, decrease the earnings by planning the devalue preparation in second year of suffering loss, and increase the earnings by items below the line to make up deficits. Based on the forgoing result, some effective measures should be made to cope with the problem about the earnings management of listed companies under financial distress.More long-range data from 1994—2006 and comparative industry model from static and dynamic angles in article become an advantage in research the related project about earnings management of listed companies under financial distress, which will provide the evidence to understand the earnings management and be helpful to monitor and boost our national capital market.