An Empirical Study On The Relation Between Asset Sale And Earnings Management

As an important way, asset sales has been adopted by more and more Chinese public corporate since 1993. In this paper, We use the Logistics regression analytical method and Mann-Whitney (U) method to examine the relationship between asset sales and earnings management. In the same time, we use the companies listed in 2006 in Shanghai Stock Exchange and Shenzhen Stock Exchange as research sample and study deeply of Asset sales.Based on the system background and theoretical analysis of Asset sales this paper analyzes the relationship between Earning Management and Asset sales. We define the earning management (ROE∈[0%,2%] or [6%,7%]) as the dependent variable, then use the companies listed of 2006 in Shanghai Stock Exchange and Shenzhen Stock Exchange as research sample to examine the relationship between asset sales and Earnings Management. Empirical results indicate that.(1) We find that asset sales has the significantly positive correlation ship with the Earnings Management of the listed company. This clarifies that asset sales is a tool of Earnings Management. It provides a support for the changes in earnings management.(2) Related Transactions, Accrual Accounts and Fixed Assets are potential tools of Earnings Management now. This clarifies that the tools of Earnings Management have been changed. The companies use the Assets sales or anything less to manage their earning now. The Related Transactions, Accrual Accounts and Fixed Assets will not be adopted.(3)"ST"companies have the less motive of Earnings Management. This due to the fact that the more stringent regulatory, the less the possibility of Earnings Management.Finally, there are some policies suggestions are put forward in this study: Firstly, make standards on Assets Sales disclosure content and format, and improve corporate initiative of information disclosure. Secondly, strengthen monitoring of stock market. Thirdly, the government needs to take care of the tools of Earning Management.The innovations of this paper are mainly in:1. Asset sales is a tool of Earnings Management.2. The tools of Earning Management have been changed.