The Influence Of Assets Impairment To Earning Management Of Listed Companies Under The New Accounting Standards

With the rapid development of society and economy, the earning management in Chinese capital market becomes one of the hottest issues of general public. Excessive earning management can not only influence the efficiency of economic resources allocation, but also will mislead the investment decisions of investors and endanger the fund safety of creditors; as a result, different interest groups will benefit or get lost from it. Since assets impairment accounting processes needs accountants make professional judgments and choose the accounting policies, there are opportunities for managers of companies to choose accountant processing methods in accordance with interests of companies or themselves, and the provision and reversal of assets impairment has become an important instrument for listed companies to manage their earning. On February 15^th, 2006, Finance Ministry of China announced new Accounting Standards in which the contents about assets impairment were changed compared with the original Accounting Standards. It must greatly influence the provision and reversal of assets impairment of listed companies and also lead an influence to the relevant behaviors of earning management. So the following two questions attract more and more attention: whether the listed companies use assets impairment in earning management after the new Accounting Standards implement or not? What is the actual influence of new Accounting Standards which related with assets impairment to the earning management behaviors?In order to find the changes of companies' earning management after the implement of new Accounting Standards, this paper chooses 1279 listed companies as samples and uses independent-Samples T Test, Mann-Whitney Test and Linear Regression to analyze the data from 2005 to 2007 of them. The results of the research shows: firstly, the phenomena that listed companies prevent loss and stop loss by using assets impairment still exists after the implement of new Accounting Standards, but the behaviors of 'big bath' and 'profit smooth' are not found in 2007. Secondly, the implement of new Accounting Standards has a significant restrictive influence on the behavior of earning management by using assets impairment, especially have notable affects on the companies which have motivation to aggrandize their loss or smooth their profit.Finally, on the basis of the results of the empirical research, this paper proposes some suggestions on how to prevent listed companies manage earning by using assets impairment in China, such as improve Accounting Standards, complete the system of enterprise performance appraisal, improve the quality of social auditing and supervision and so on.