Study On Contractual Motivations Of Earning Management

Earning management is one of the key fields in west accounting and capital market research. Recently, and the studies on the contractual motivations of earning management in listed companies is most important part in this field.There are lots of studies on earning management contractual motivations based on the fruits of western researches in this field in China. However, the western researches on earning management contractual motivations are present the trend of pluralistic and multilevel, and the researches on earning management contractual motivations in our country are simple, most researches are focus on catering for the three supervise systems in the market of capital which are IPO, right offerings and Seasoned Equity Offering and so on, and there are few research on the contractual motivations of earning management.With the deep going of economic system and advancement of modern enterprise system reform, the outside circumstance and inside motivations have been coming into existence for earning management in Chinese listed companies, the researches on the contractual motivations of earning management will surely pace into a deeper layer,especially on the relation between contractual and earning management. Therefore this paper chose the point of view on the contractual motivations of earning management to study.Based on the contract theory and the fruits of scholars abroad and inside for reference, this paper using the methods both of theoretic analysis and empirical testing has been made on contractual motivations of earning management. Firstly, this paper briefs earning management, including its definition, the basic theoretics, and the summary of the investment opportunity set.Secondly, this paper analyses the impact on earning management in listed companies from Investment Opportunity set Hypothesis, Pay Contract Hypothesis, Debt Contract Hypothesis, Political Cost Hypothesis. Finally, 494 manufacturing listed companies were chosen as samples to test the validities of above 4 hypotheses in China.With the multivariate linear regression test, we find that: (1)Pay Contract Hypothesis have notable positive influence on enterprises'earning management, (2)Debt Contract Hypothesis and Investment Opportunity set have not notable negative influence on enterprises'earning management, reversing our anticipation,that because this paper's data sample is based on 2007, our country economy grown strongly, the securities business presented thriving, and the new accounting rule was publicized in 2007. (3)Political Cost Hypothesis have not notable negative influence on enterprises'earning management, as our anticipation. This suggests that ratios based on book values and market values have different impacts on management's choice of accounting policies, because of Chinese special economy and politics circumstance.