Influences Of Accounting Principles Evolutions On Real And Accrual Earnings Management

Conventionally, earnings management in accordance with the manipulation of different objects can be classified into real earnings management (Real EM) and accrual-based earnings management (Accrual-based EM). The Real EM is the manipulation of the enterprises to its actual business activities, in order to influence the corporate accounting profits; Accrual-based EM is the manipulation that enterprises apply to process accounting information by utilizing accounting standards, accounting policies, etc such that the purpose of concealing some actual results could be achieved.Actually, the existence of accounting standards is not the essential reason of generating the EM behaviors. Nevertheless, each change of the accounting standards would bring new impact on the corporate EM tools together with opportunities. Scientific and reasonable accounting standard has significant impact on the effectiveness of Accruals-based EM as well as indirectly affections on the Real EM. Thus, during the pre-and post-periods of the implementation of the new accounting standards, corporate changes on Real and Accrual-based EM have become a widespread concern.However, current research regarding the comparative study between Real EM and Accrual-based EM is still lack of exploration. But the Real EM tool is indeed being more and more frequently used by the enterprises, especially after the enactment of the new accounting standards. Hence, how the Real EM behaviors would change, whether the Real EM behaviors have a negative effect on Accrual-based EM behaviors and how would both EM impact on corporate profits and capital markets, all of which are highly worthy of concern. From this perspective, the article concentrates on both the study of the Real EM and the Accrual-based EM, so that the observation and analysis of the impact of the accounting standards changes on the EM could be conducted in the above two ways. We divide the paper into five parts for the elaboration of the content. In the first section, the background knowledge and objectives of the study are introduced, and the methodology involved is also briefly illustrated; the second and third part focus on the literature review and theories of the related work, which would list the domestic and foreign literature and make a theoretical analysis on the two EM and the accounting standards changes:the fourth part of this paper is an empirical study about the accounting standards changes and the EM. And on the basis of the theoretical analysis, we would make the hypothesis about the relationships between the overall EM levels of the listed companies and the accounting standards changes. We have also collected the financial data of listed companies3years pre-and post-China’s accounting standards changes and introduced the structure of the relevant variables and the establishment of models. On which basis, the hypothesis would be tested using statistical software STATA. The fifth chapter is the conclusion and recommendation part of the paper. Based on the results of theoretical and empirical analysis, some final conclusions would be drawn; and this chapter also makes recommendations on how to improve the accounting system and perform conducive regulatory from the perspectives of accounting standards, corporate governance and external regulatory respectively; the final content of this part is the summary of the key elements of this paper, which also points out the deficiencies in the course of the study and the directions for future research.The conclusions of this paper are summarized as the following aspects: First of all, through the verification of the Real RM model, the impact of accounting standards changes on corporate Real EM behaviors have been tested. After the implementation of the new accounting standards, in addition that the cost of the Real EM is not that significant, the rest of the Real EM indicators all have a significant positive correlation with the implementation of the new accounting standards, which to prove the accounting guidelines changes increase the corporate Real EM behaviors to some certain extent.Secondly, through testing the impact of the accounting standard changes on corporate Accrual-based EM behaviors, we get the results showing that after the implementation of new accounting standards, the Accrued-based EM have declined and the changes in accounting standards to a certain extent have reduced the Accrual-based EM.Finally, through the theoretical analysis and empirical test, it could be seen that the implementation of new accounting standards has achieved some initial success. The Accrual-based EM behaviors begin to decline, while at the same time enterprises have started to make EM through the manipulation of real activities, indicating that Real and Accrual-based EM have a relative inversely proportional relationship, and the EM behaviors have started to transfer from Accrual-based EM behaviors to the hidden Real EM behaviors.Currently most of the domestic studies about the EM only focus on the Accrual-based EM while the research about Real EM is very inadequate. The contribution of this paper is to enrich the study of the Real EM. And with reference to the comparison research between the EM before and after the periods of the implementation of the accounting standard, the paper also increases our EM literature and provides a good reference for policy improvements.However, due to the limited scope of my knowledge, this paper also has many inadequacies. Firstly, as the data is taken in a relatively short time span, the stability of the conclusions needs further witness; secondly, the control variables added in this model may not be comprehensive enough,so the validity of the model also need further study.