Analysis Of Earnings Management

Accounting information exposed by the listed company reflects the profit capability and financial state of a company. It is a very important basis for investors to value a company's operating condition and developmental potential. However, because of the information asymmetry, in the securities market of our country, there are enormous hidden risks on the information disclosure of the listed company. Because the operator of listed company has strong motive to window-dress financial report by earnings management methods. At such an environment, we hope to discuss the phenomena of earnings management in china's securities market.This paper mainly divided into four chapters. The first chapter presents the summery of earnings management and the relative four theories including Modern enterprise theory, Information economics theory, Property right theory and Effective capital market theory. The second chapter originally explains the motive (including inner motive and outer motive) and basic characters. It also analyzes the chief methods of earnings management among listed companies, which consists of accounting methods, non-accounting methods and the backup and protection of local government. Moreover it takes American Eron Company as an example to illustrate the above-mentioned methods. Atlast, it briefly introduces four kinds of measure models for earnings management.In the third chapter, we adopt the positive study approach. Having analyzed the phenomenon of earnings management in the china's listed company. This paper regards listed companies of 2001-2003 years of Shanghai and Shenzhen as the research object. After observing the earnings per share (EPS) and return on net assets (ROE) of listed company, we examine the continuity of the index of the earnings during these 3 years at the same time. Afterwards, we choose the listed companies, which are drawn from the non-standard auditing opinions by CPA in 2003 as the studying sample, and the listed companies, which are drawn from the standard auditing opinions as the controlling sample. Through linear return analyses, we could verify that there are the phenomenons of earnings management in china's listed company. Finally, it analyzes the component proportion of the studying sample. The last chapter that puts forward the corresponding countermeasure as to the earnings management's current conditions: improving the efficiency of the capital market, perfecting accounting standard making, reforming company system of reward and outstanding achievement evaluation, etc.