Study Of The Impact Of Information Disclosure On Earnings Management Of Chinese Real Estate Company

Earnings management has been a hot topic concerned by theorists and practitioners. The concept, motivation, methods, measurement and economic consequences of earnings management are endless. These make a theoretical contribution to earnings management. Earnings management makes the profit adjustment to meet their interest. After earnings management, the provision of information to investors does not reflect the real profit. This will mislead investors' decision-making, and cause losses. Information asymmetry is a necessary condition for earnings management; information disclosure can reduce the information asymmetry between investor and the management, then reducing earnings management and the investor's wrong decisions. In China, the real estate company is an industry about the people's livelihood; its development will lead to the development of the entire national economy. In recent years, real estate price is unreasonable, unrealistically high price seriously affects people's quality of life. The real estate company has much profit, high profits brought by long-term high prices and regulatory and disclosure deficiencies create a relatively large space for earnings management. Studying the impact of information disclosure on earnings management of the real estate company and clarifying their relationship have important theoretical and practical economic significance:this can promote the development of earnings management theory; more conducive to protecting the interests of investors; to, have the role of a certain model to make disclosure policy for the government and related regulatory bodies.This paper selects the real estate company as study, studies the impact of information disclosure on earnings management by theoretical and empirical analysis. There are many literature about the information disclosure and information asymmetry, information disclosure and earnings management and real estate information disclosure and earnings management, these documents reflected the information disclosure and information asymmetry was negatively correlated, information disclosure and earnings management was a negative correlation and existed earnings management behavior and information disclosure problem in the real estate company.From the theoretical point of view earnings management, the subject of earnings management is company management, accounting principles and methods is object, earnings management only adjusts the profit in reporting period, it does not change the true level of profitability and cash flow in the entire life cycle. Earnings management motivation includes debt covenants, capital cost driver, the political cost drivers, managers reward motivation, and tax saving motivation, the motivation of earnings management in real estate company is mainly due to tax-saving, because real estate prices are very high comparing with the cost, company needs earnings management in order to reduce the payment of taxes, and save cash flow. Most companies will use asset impairment, the changes of accounting policy and accounting estimates, mergers, government subsidies, the real estate company also create the conditions to delay or advance the confirmation income, share the costs according to the intention of management, and use the fair value measurement model of investment property.from the point of disclosure of information theory view, our country has no specific and measurable indicators about information disclosure, only has the ratings of qualitative indicators. Evaluation mainly starts from the principles, such as reliability, relevance, timeliness, adequacy and consistency. In factors of quality of information disclosure, good or bad internal governance structure will affect the level of quality of information disclosure; companies may choose to disclose good news, not disclose that affect corporate reputation out of cost considerations (such as litigation costs resulting from the disclosure); accounting officer is the direct operators of accounting information, the quality of accountants directly affect accounting information disclosure; Lag of accounting standards with respect to the complex economic matters, determine the flexibility to accountants, resulting in the different information disclosure; lack of enough supervision also has an impact on the quality of information disclosure.From the analysis of real estate company status, the real estate companies have invest in large-scale, capital-intensive, the development risk, income high, it is vulnerable to the impact of policies since it's directly related to the development of the national economy and people's quality of life. The real estate companies need a lot of money for houses mostly by the mortgages of banks, the most typical financial characteristics of the real estate companies is high asset-liability ratio, and also have strong profitability, with large total assets. The profitability of the real estate companies mainly due to rising prices, the reasons of high prices are the major factors:monopoly with supply and demand factors, the Government of factors, bank loans factors, media-oriented factors. Information disclosure has some problems:lack of voluntary disclosure, even voluntary disclosure, disclosure of the contents of disclosure is also conducive to their own interests. There are little forward-looking information, such as the future development and strategies. Exaggerating propaganda about housing quality, residential environment and other non-financial information misleads the public to judge the trend for real estate. So the information asymmetry of the real estate companies makes hard for investors to make the right investment decision. Most real estate companies have pre-sale housing system, the existence of pre-sale and regulatory system and information disclosure in the real estate companies creates the conditions for earnings management.View of the above theoretical analysis and the analysis of the real estate situation, this paper proposes two supposes in empirical study:there exists earnings management in real estate companies; and the information disclosure and earnings management is negatively correlated in real estate companies:the higher(lower) quality of information disclosure, the lower(higher) degree of earnings management. Firstly, choose the samples. At present, only the Shenzhen Stock Exchange has ratings on information disclosure. So we only study real estate companies in the Shenzhen Stock Exchange. Select the real estate companies in 2001-2009 as a sample, the total is 301 sample in nine years. In the course of the study, we exclude the incomplete data companies; retain the ST companies, because ST companies also have earnings management in order to maintain eligibility. Secondly, design variables. Earnings management is an explained variable; the measurement of earnings management (Absolute value of maneuverability profit) has four methods:total accruals method, the specific accruals method, the real earnings management and earnings distribution method of measurement. The most commonly used method is total accruals method in empirical study theorists. We use this method for the measure of earnings management. First use the formula to measure the accruals:total accruals= (net income-net operating cash flow)/total assets. Calculate the parameters in basic Jones model. Then bring these parameters into the modified Jones model to count the non-manipulative profits, make total accruals minus non- manipulative profits, remaining is operable profits. Maneuverability profits include two cases:increase and reduced, so manipulate the absolute value of accruals to measure for earnings management. Information disclosure as explanatory variables:the present stage, there is no specific quantitative indicators, only the qualitative ratings. The current measure of information disclosure is created by an organized body, the researchers created their own, and the measure of individual agents, these types of measure of the methods have advantages and disadvantages, we choose the measure of the Shenzhen Stock Exchange, Shenzhen Stock Exchange is the authority of the Stock Exchange, the ratings includes excellent, good, pass, failure. We use assignment by Lu Zhen fei:excellence counts 4 points, good counts 3 points, passing counts 2 points, and failure counts 1 point. In the control variables, the paper joins the company performance, capital structure, ownership concentration, firm size. Select ROE as the representative of the performance, asset-liability ratio represents the capital structure; proportion of the largest shareholder represents ownership concentration; logarithm of assets represents company size. Again, select the model. We first test earnings management of the real estate companies with the basic Jones model, and then make improvements to the modified Jones model, add factors of receipts in advance to count non-manipulative profits, because the real estate companies'receipts in advance for pre-sale system is also doomed to be used for the regulation of main business income. And then use multiple linear regression models to prove the relationship between information disclosure and earnings management in the real estate companies, which joins the control variables such as firm performance, capital structure, shareholders centralized level, asset size impact on earnings management. Finally, use SPSS software to Jones model and multiple regression linear regression models, draw conclusions: there exists earnings management in real estate companies; and the information disclosure and earnings management is negatively correlated in real estate companies:the higher (lower) quality of information disclosure, the lower (higher) degree of earnings management.Referring the conclusions and the problem of information disclosure in real estate companies and combining with Chinese national conditions, we propose the following policy recommendations:establish a complete evaluation systems and indicators; the government should play the role of monitor and improvement of the information disclosure function, the media should strengthen the supervision and the companies need to improve the risk information disclosure system. The main contribution of the article is:prove that the impact of information disclosure on earnings management in the real estate companies:the higher quality of information disclosure, the lower level of earnings management; analyze the causes of high profits in real estate companies, including monopoly with supply and demand factors, the factors of government, bank loans factors, media-oriented factors. These factors can be used as reference for the government to control prices; in the model, the measurement of non-manipulative profits adds the factor of receipts in advance.