Earnings Management Research

Earnings management, which is called "a game of market participators", has a long history in western countries, and more attention has been paid to by our country's accounting academia in recent years. Related empirical results show that there are large numbers of earnings management behaviors in our country's companies (especially in listed companies). From the efficient contract point of view, appropriate earnings management behaviors can help the company to face the inadequacy and rigidity of contract flexibly, so that the company can reduce the contract cost and increase the company value. From the capital market point of view, appropriate earnings management can transfer internal information as much and soon as possible, and it can decrease the information lagging caused by communication barrier. However, excessive earnings management is totally an overmuch opportunism behavior. It will do harm to accounting information infidelity, investors benefit, development of stock market and the social economy system. At present, most of our country's companies has excessive earnings management behavior, and this trend will overflow without governing.This paper firstly defines the basic meaning of earnings management, then analyses the cause and technique methods of earnings management, and finally studies the identification methods and governing countermeasures of earnings management. Based on such frame, this paper is divided into five parts: the basic meaning of earnings management; the motive analysis of earnings management; the technique methods analysis of earnings management; the identification study of earnings management and the governing countermeasures of earnings management.Scholars at home and abroad didn't agree on the basic meaning of earnings management. Based on former researches, this paper gives a basic meaning of earnings management, earnings management is the behavior that in order to maximize the administrator's interest or company value, the company management board transfers beneficial information to the accounting information users by choosing accounting policies and "constructing" transactions, which is beyond their legal responsibilities. Furthermore, this paper studies four basic features of earnings management: the subject of earnings management is company management board; the object of earnings management is generally accepted accounting principles, accounting methods and accounting estimation and choice of time as well as date; the main purpose of earnings management is to get private interest; there are two ways of earnings management: professionals judgment and transactions layout.Earnings management is driven by many activation factors. This paper analyses the motive of earnings management mainly from two aspects: the first one is its cause of existence, and the second one is its motive of implementing. On one hand, because of imperfect market system, nonstandard of accounting policies, laggard market custody and insufficient punishment, earnings management exists inevitably, and it is impossible to be banished entirely. On the other hand, because of the various demand of self interest or company interest, such as politics, economy and material, the implementing of earnings management is subjective, which makes effective control of earnings management behavior possible.The main purpose of earnings management is to get private interest, but this has to be done by company's accounting behavior, with form of accounting data. This paper discusses the technique methods to manage earnings, discloses the methods and means of earnings management, such asrecognizing fake income, recognizing fake expenses, using connected transactions, using unusual profit and loss, changing accounting policies and accounting estimation and so on.In the study of earnings management identification, the author expatiates on how to discover the earnings management of company. It will help discover the company earnings management behavior by paying attention to the...