An Empirical Study On Investor Sentiment、Managerial Overconfidence And Earnings Management

Earnings Management is not a simple accounting behavior, but the result of multi-interestconflicts, so its nature is the problem of corporate governance. So far, most of the studies onearnings management are based on the premise of rationality. However, in the reality of capitalmarket, Investor Sentiment and Managerial Overconfidence appear at the same time. So theco-existence of the double irrational will produce what kinds of impact on earningsmanagement?In order to study this problem, we select the A-share listed companies in Shanghai,Shenzhen capital market between2007and2010as the study sample. First, referring to Deehowwho proposed the modified Jones model in1995, we estimate the extent of earnings managementto the sample during sample period. The empirical results confirmed that sample corporateexistence of earnings management behavior. Secondly, in order to explore whether the investorsentiment affect earnings management behavior, we use the panel data of995listed companies in2007-2010to regression both. The empirical results confirmed that investor sentiment has asignificant positive impact on corporate earnings management behavior. On this basis, we usesocial psychology theory and cater theory and introduce the indicator of managerialoverconfidence to investigate when investors and managers are irrational whether the investorsentiment infection and passed to managers? High or low investor sentiment infections managershave the same nature of emotions, and prompted managers to manage earnings in order to caterto the demand for investor sentiment. Investor sentiment impacted on corporate earningsmanagement behavior by managerial overconfidence which plays an intermediary role.