The Influence Analysis Of Earnings Management Factors On The Early Warning Of Corporate Financial Crisis

The occurrence of financial crisis tend to brought a fatal blow on the corporate’ssurvival and development, Heavy losses may be brought to investors at the same time.More and more uncertain factors about the current macroeconomic environment gotogether with the possibility of corporate financial crisis. In order to avoid enterprisefinancial crisis, company management monitor those alarm indicators which canindicate the financial crisis, and also make the modified measures. Investors can alsomake decides on whether or not to invest to the company which index indicator showsa warming signal by the analysis of financial data. For some purposes, Managementusing Earnings management measurement to adjust the profits, the financialinformation presented by the company may go far away from the real position.However, this operation will also leave marks, and the tracking of these traces will beconducive to the recognition of the company’s financial position, to improve financialcrisis warning level. In the case of using financial indicators to establish the higheraccuracy financial early warning system, this paper will focus on the study ofrelationship between company earnings management behavior and possibility ofcompany financial crisis, and the usage of earnings management variables. Aroundthis topic, each chapter is organized as follows:Chapter1: Introduction. Firstly, this part indicates the research background, anddescribes the value of company financial crisis early warming study and the reasonwhy choosing earnings management variables to be the indicator of warming study.Secondly, introduces the relevant study method. Finally, analyses the logicalframework and innovation of this paper.Chapter2: Literature Review. This part provides a comprehensive analysis of therelevant research literature about the development of company financial crisis early warming method and the warming variables, and also the purpose, artifice andmeasurements of earning management. At home and abroad, there are severalrelationship study between the two topics. Based on the theory listed, we can thinkthat company financial crisis early warming study and earning management studyhave prepared a mature opportunity for using earning management variables tomodify the company financial crisis early warming models study. This makes thefurther theory basis for this study.Chapter3: The design of the empirical study on the Influence analysis ofEarnings Management factors on the early warning of corporate financial crisis.Firstly, this part makes the hypothesis for qualitative and quantitative analysis.Secondly, introduce the screening methods for the study samples, and give a specificfilter to distinguish the financial crisis and non-financial crisis samples. And then, thedetailed description of calculation method of the key variable for the study——Discretionary Accruals factor was given. Finally of this part, the models of this studywere established.Chapter4: Statistical Analysis. Firstly, the frequency distribution method wasused to analysis earnings management behavior of listed companies in China. And theresults of descriptive statistics show that there are more earnings managementbehavior in the financial crisis company. The conclusions on the frequencydistribution of samples make the foundation to lay for the study of the relationshipbetween earnings management and financial crisis early warming of listed companies.From the calculation and descriptive statistical analysis of Discretionary Accrualsfactor, we can see that there are significant distinguish between financial crisis andnon-financial crisis samples. The Discretionary Accruals factor of financial crisissample is obviously higher than non-financial crisis sample before the occurrence offinancial crisis. The analysis results of Logistic regression model created by Chapter3show that there are significant positive correlation between the probable of thecompany is in financial crisis and Discretionary Accruals factor, which is on behalf ofthe company earnings management. The likelihood of company financial crises goestogether with The Discretionary Accruals. The comparison results also show that theinterpretation and the effectiveness of early warning model added DiscretionaryAccruals are better than the model build alone on the financial indicators.Chapter5: Conclusions and Prospects. Give a Comprehensive analysis oftheoretical results and empirical results, the defects and deficiencies about this article.Finally,give a suggested prospective on this study. Innovation:(1)Make the earnings management study and company financial crisis earlywarming study combined, and using the Lu Jianqiao’s modified Jones Model tocalculate the Discretionary Accruals factor, and using the calculated factor to explainthe relationship between the two topics.(2)Using Logistic Model to establish the target model, and comparing modelswith earnings management factor and no earnings management factor, the result makeclearly that the model with earnings management factor showing higher interpretationand effectiveness.Limitations:(1)The volume of financial crisis sample is less than ideal statistic model, sothere may same variance to interrupt the result of statistic analysis.(2)In this paper,the pure financial model is established by reference of classicmodel, rather than make the empirical calculation for the samples, so there may samevariance to interrupt the result of statistic analysis.