Empirical Analysis On The Relationship Between Manger-ial Risk Preference And Earnings Management

In recent years, with the development of behavioral finance and behavioral corporatefinance theory, the irrational behavior of the managers of the company’s financialdecision-making has attracted many scholars to study. But so far, the existing researchon individual risk preferences is mostly for investors, the study is also measured themanager’s risk preferences, but it is just used in the investing and financingdecision-making area. So on the basis of firstly reviewing the relative referenceshome and abroad and illustrating the theories about managerial risk preference andearnings management,this paper takes the Chinese companies listed in Shanghai andShenzhen between2008and2010as research samples to do empirical studies. First ofall, from the managers themselves and the company to select two kind of indicators,using principal component analysis method to measure the managerial risk Preference;then, using the modified Jones model to measure the extent of earnings management,and finally to establish the multiple regression empirical to research the managerialrisk Preference’s effect on earnings management of listed companies. Then，this paperclassifies the ultimate controller of China’s listed companies into two major kinds,which are state controller and private pyramidal controller, for the purpose of studyingthe different effects of managerial risk preference in this two controller to the extentof earnings management. Empirical studies have showed: there is a significantpositive correlation between the managerial risk preference and the extent of earningsmanagement.Compared with the state controller, private pyramidal controller hasmore significant positive correlation between the managerial risk preference and theextent of earnings management.