Empirical Research Of Enterprise Characteristics Affecting On Earnings Management

The earnings management and its extent play important roles in evaluating a listedcompany’s quality and the long-term healthy development of securities market. As we allknow, the information asymmetry and goal inconsistent existed in principal-agentrelationship are the root of the problems of earnings management in listed companies, andthe board of directors and managers are the key factors in influencing the earningsmanagement and its extent. Based on principal-agent theory, stakeholder theory and gametheory, this paper analyzed the internal mechanism and behavior motivation of companiesearnings management, and discussed the earnings management of listed company basedon the board features, executive incentives, enterprise property rights and enterprisepolitical relationships perspective.What is more, taking manufacturing China’s A-sharelisted companies as the sample, this paper analyzed the earnings management behaviorand its extent in different listed companies by regression model.After empirical studies, this paper found that Chinese listed companies existedearnings management behavior commonly, but companies that have differentcharacteristics have different extents of earnings management significantly. The board ofdirectors system, controlling relationship and the incentive compensation plan are the keyfactors affecting the extent of earnings management in the company characteristics.Specifically, the independent director system, the dual structure in leadership and theestablishment of audit committee have negative impacts on the earnings managementbehaviors of listed companies, and the extents of earnings management are low inenterprises that are owned by state or have political relations. What is more, the board ofdirectors and executive ownership shares have positive impacts on the earningsmanagement of listed companies. As for the scale of board, the meeting numbers, theshareholder’s proportion in board and the levels of executive’s salary have no significantimpacts on the earnings management extent of listed companies. In addition, this paperalso found that the company’s profitability and growth, financial leverage and othersfactors have some effects on the earning management in listed companies.