Emprical Research On The Impact Of The Revision Of Debt Restructuring Standard On Earnings Management Of Public Company

The establishment of accounting standards is often a process of multi-stakeholdercoordination. In order to regulate the behavior of the debt restructuring of listing corporations,the debt restructuring standards is a special accounting standards issued by The Ministry ofFinance. There are two changes about the debt restructuring guidelines since1998. The coreissues is the confirmation of the gain on debt restructuring, which is firstly included in“non-operating income”, and then included in “capital reserve” instead, finally included in“non-operating income”. About the revision of the2001guidelines, the reason given by theMinistry of Finance is that:“According to the original provisions of the guidelines, the debtforgiveness is included in the income of the debtor’s debt restructuring process, which alsocreated an opportunity for a few companies to manipulate profits. In order to resolve theexisting problems timely, the Ministry of Finance decided to revise the original guidelines.”Revision of the2006guidelines is to establish the accounting standards system, which isconvergence with IFRS. Such change in the context of convergence with IFRS is of greatsignificance for China’s accelerate integration into the global economy. However, whetherwill the implementation of the new guidelines have the same problem with the old guidelines?Whether will a company once again take advantage of the debt restructuring to inflate assetsand manipulate profit? This paper used the theoretical analysis and empirical researchmethods to study the above problems.Specific research ideas in this article are as follows:Through the review of the relevant literature on debt restructuring and earningsmanagement, it found that the characteristics of the debt restructuring company after theimplementation of the new standards is that: poor financial condition before the restructure,the high rate of the balance, or even losses, but earnings retained after the restructure.Empirical research is the main method to analyze the impact of the new debt restructuringguidelines on listed companies. The sample was divided into two stages by the year, in whichthe new guideline was implemented. The2005-2011data is belong to the old guidelines,while the2007-2011data is belong to the new guidelines. This paper build a LOGITregression model on listed companies, which is to verify that whether the direct cause of theperiod of the debt restructuring of listed companies is the motivation of earnings managementor not. The2005-2006results found that there is no significant correlation between themotivation of earnings management and the probability of debt restructuring. While2007-2011results found that there is significant correlation between the motivation ofearnings management and the probability of debt restructuring. This shows that listingcorporation used the revision of debt restructuring guidelines to achieve earning management.There are some specific recommendations for the problem occurred in the process of thedebt restructuring implementation. Because the formulation of the law can effectively regulatecorporate behavior, this paper proposes to change the profit indicators of suspending andterminating the listing from deducting non-recurring gains and losses into before deductingnon-recurring gains and losses; to prevent the abuse of debt restructuring, it is recommendedthat making a series of quantifiable indicators to regulate the implementation of debtrestructuring; it is necessary to develop more indicators linked with no-profit in order to improve enterprise performance appraisal,which can avoid corporate profit manipulation; thedetermination of the value of the assets is a key in the debt restructuring problems, in order toaccurately determine the fair value of the assets, it needs a more authoritative, independentthird-party intermediaries.This paper provides empirical evidence for the evaluation of the economic consequence,which is produced by the revision of the debt restructuring guidelines. It also has theoreticalsignificance for improving accounting standards and reference value for securities marketregulators and investors.