An Empirical Study Of The Listed Private Enterprises’ Executives’ Political Relations’ Impact On Earnings Management

Since the reform and opening up, although the economic system anddevelopment policies that private enterprises are faced are greatly improved,private enterprise’s development still faces some of the deficiencies in thesystem, such as restrictions on market access and financing problems. Also,Government regulation and control of resources is still large, so, in order tobetter survival and development, the listed private enterprises began to pursuethe establishment of a political relationship, and then use their political relationsfight for enterprise development more convenience and opportunities, such asthe financing facilities, lower taxes, reduce trade barriers. Meanwhile, in orderto hide the concern in the community or market regulation by these facilities thatthey got through political relationship, private enterprises will tend to reducetheir performance by means of earnings management to avoid the result in theimposition of the government’s stringent controls.In this paper, based on the summary and analysis of the research status, thepaper discusses the definition, measurement and related theory of the politicalrelations and earnings management, and on the basis of theoretical analysis tothis, the paper put forward three hypotheses, and select Shenzhen and ShanghaiA-share private listed companies experience data in2007-2011as study sample,and use descriptive statistics, correlation coefficient test, multiple regressionanalysis and other methods mentioned assumptions on the empirical analysis.The results show that as compared to no political relations, the listed privateenterprises that have political relations have a higher level of earningsmanagement, secondly, as compared to the private enterprises that politicalrelations are belonged to key executives, the private enterprises that politicalrelations are belonged to non-key executives have higher level of earningsmanagement of private enterprises; thirdly, corporate governance have a greaterimpact on the relationship between executive political relations and earningsmanagement, while it’s private enterprises with good corporate governance thathave a greater impact on political relations and earnings management, and poorcorporate governance versus smaller impact.From an accounting perspective, in the context of China’s economic system,this paper explored listed private enterprises’ political relations’ impact onearnings management, and it enriches the theories of the political relations andearnings management and the empirical research of listed private enterprises’political relations’ impact on earnings management. Meanwhile, for the research conclusions, the paper recommendations that listed private enterprises should bereasonable to build political relations and improve corporate governance, theinvestors should rationally choose to invest in an object, and our governmentshould actively optimize the environment for the development of privateenterprises, strengthen financial information disclosure system, therebycontributing to our country private enterprises as well as the healthydevelopment of the capital market.