Research On Accrual-based And Real Activities Earnings Management Of Listed Companies In China

Since the establishment of the stock exchange in China during1990s, the capital market has developed quickly, which prompt the prosperity of economy and provides a higher development platform for companies. With the expansion of company scales, more and more problems appear, especially the phenomenon of the distortion of accounting information, not only misleading the information user to make wrong decisions, but also making a serious impact on the sound development of the capital market. The distortion of accounting information is mainly caused by the earning information manipulation and the earnings management issues capture the attention of the academia and practical circle both at home and abroad.Research shows the seasoned equity offerings (SEO) and mergers and acquisitions (M&A) will involve earnings management issues, but most studies focus on the accrual management, and attributed the decline in post-SEO performance to the reversals of accrual. However, it is a risk for managers, only engaging in accruals manipulation to achieve the earning target; the manager is fully equipped with the motivation to manipulate the operating activities. This paper attempts to study on both the accrual-based and the real activities earnings management, which will enrich the study on the earnings management, hoping the findings will offer auditors and regulatory agencies some basis for formulating relevant rules and provide reliable earning information to the investors.This paper first reviews the earnings management theories and further elaborates the relevant reference from the perspective of accruals and the real operating activities separately. Then analyze the earning management motivation of the listed companies in China during the period of SEO and M&A. The statistics of "the companies of SEO from2001to2007" and "the listed companies of making M&A from2003to2009" are selected as study samples to analyze the existence of the real earnings management in China and the impact on the further performance of the company, and found that the listed companies engage in both accruals management and real earnings management during the period of SEO and M&A. Furthermore, compared the effects of the accrual-based and real earnings management on the future managerial achievement, found the latter do more serious effect on the decline of the managerial achievement, which shows the decline of the future managerial achievement is not only because of the reversal of accruals, but also due to the real activities. At last, test the factors affecting the real earnings management by constructing a multi linear regression model and found that the higher the stake of the largest shareholder and the greater the market value of the company will bring the positive impact trends to the real earnings management; meanwhile, the higher the return on total assets and the more concentrated the company structure will have a negative impact on the real earning management.