An Empirical Study On Earnings Management Motivation And Capitalization Of R&D Expenditure

In2006, the ministry of finance issued new ASBE, regulated that r&d expenditure adoptconditional capitalized method, the same as the international accounting standards. TheConfirmation, measurement and disclosure of r&d expenditure is not only related to the profitsof enterprise stakeholders, but also related to the enterprise Stable and sustainabledevelopment. The new ASBE adopting conditional capitalized method make the enterprise nolonger worried about too much r&d expenditure and Falling profits, which greatly enhance ther&d enthusiasm of enterprise. However, in the new ASBE, research stage and developmentstage is not clearly divided, and the five conditions of capitalization are relatively abstract,which left the managers a space of earnings management. Therefore, the accounting policychoice become the means of enterprise earnings management, the accounting choice of r&dexpenditure is likely influenced by the motivation of earnings management.The author takes full disclosure of r&d expenditure of SME listed companies from2007to2010as research samples, and then empirically analyzes the correlation betweencapitalization of r&d expenditure and motivation of earning management to discusses whetherthe choice of r&d expenditure capitalization is influenced by the motivation of earningsmanagement. At the same time, the author uses modified Jones model calculating the degreeof earnings management, and divides the samples into two group(high degree of earningsmanagement group and low degree of earnings management group) according to this index,then respectively does an empirical tests on the two groups to explore that which kind ofmotivation will influence the choice of capitalization for companies of different earningsmanagement degree. The results show that: in our country, r&d expenditure capitalization ismainly out of compensation contract motivation, executives change motivation and capital market motivation, income smoothing motivation and debt contract motive is not been verified;For companies of different earnings management degree, the motivation of surplusmanagement is different, r&d expenditure capitalization of high degree earnings managementcompanies is out of compensation contract motivation and capital market motivation, r&dexpenditure capitalization of low degree earnings management companies is out of executiveschange motivation and capital market motivation, the capital market motivation has beenverified no matter in whole samples or in grouped samples.The research conclusion reveals r&d expenditure capitalization is influenced by manykinds of surplus management motivation, and different companies have different motivation,which enrich the existing research results and provide policy proposal for the Chinesegovernment to Perfect the market supervision system and ASBE.