Study On Profit Control Motivation Of Large Shareholder's Accounting Estimates Change Activity

Listed companies would use several ways to adjust their profits, including changing accounting policy or accounting estimates. Currently, China supervises the accounting policy more and more strictly. For example, the deduction of some assets cannot be carried back, according to the new edition Corporate Accounting Principle, which could allow the listed companies to make use of accounting estimates to control surplus. Based on some statistics, during 2001 and 2004, the companies which had estimates change was from 10.52% to 14.72% in all listed companies. This report is based on a share companies which had estimates change between 2003 and 2007. The main issues are: (1) the profit control activity in the listed companies (2) the relationship between large shareholders and the profit control activity.By using standard research and empirical research, the report finds out: (1) the listed companies in China make use of accounting estimates change to control surplus and make big bath. (2) there are distinct differences in four characteristics, namely chairman, board member proportion, supervisor proportion and holding proportion. (3) large shareholders have close relationship with the surplus control activity, including the assignment for chairman, board members and supervisors. The closer the large shareholders control the company, the obvious the profit surplus activity is.We also give some advices according to our research results.