Empirical Research And Earnings Management For Public Media Exposure

As the phenomena of financial behavior in the company, earnings managementnot only reduces the earnings quality, but also provides more space for managers’self-interest behavior and increases the company’s agent cost. So the earningsmanagement is the embodiment of the defects of company’s internal control. Basedon existing research results, law and finance theory provides new research thoughtsfor controlling company’s behavior of earnings management. Although China atpresent have the market environment and legal environment required by law andfinancial theory does not, the theory also expands our horizon, that macro factorsshould be take into account in controlling earnings management. The study of mediamonitoring is one of the most important innovations.In China, there are three advantages in media monitoring playing the role ofcorporate governance, especially in reducing the degree of earnings management.First of all, media monitoring could make information more transparent and openly,which could relieve information asymmetry. As we know," information asymmetry"is one of the preconditions for the existence of earnings management. By exposingmisconduct of the firm, media monitoring can reveal more information to the public.In additional, the public and corporate stakeholders will also pay more attention to theenterprise by negative reports. Under various pressures, firms have to disclose moreinformation in order to reduce the pressure. Then the company’s earningsmanagement behavior will also get controlled. Secondly, the cost of mediamonitoring is relatively low, especially with the present network technology. Withoutspending too much on the information, users can get the media news effectively.Compared to other information channels, which need to spend a lot of time and effort,media channels is more suitable for smaller investors and the public. Thirdly, mediamonitoring can reduce personal gains of the CEO, disclosure accounting scandals,improve the efficiency of the board and control astronomical salaries and zeropay.More importantly, media and information users in the process can achieve "win-win" situation. Media helps the public get information, so that the corporategovernance is proved and investor interests are protected. What is more, thecompetitiveness of media could also be enhanced during this process, which canencourage media to disclosemisconduct of listed companies truthfully and deeply.Based on the analysis above, this paper discusses the relationship betweennegative media reports and earnings management. Through a unique sample, we alsodiscuss the relationship between the degree of media disclosing and earningsmanagement. Empirical results confirmed that media plays a role in monitoringbecause there are more negative press coverage in the lists of earnings managementthan other lists．The paper further found that the deeper of disclosing, the stronger ofthe negative effect. The investigation means that the media role of monitoring cancontrol earnings management. And the negative effect differs from media’ssupervision.This research combines normative research and empirical research together. Itnot only enriched the research results of media monitoring earnings management, butalso improves empirical data for future studies, such as reducing company’s earningsmanagement, improving level of earnings quality of listed companies,raising ability of corporate governance, and playing the role of media monitoringeffectively.The paper includes five chapters. The first chapter introduces the background oftitle selected and the research significance. The second chapter combs existingresearch of media monitoring and earnings management. In the third chapter weposed three hypotheses. In The fourth chapter we analyzed the hypothesesempirically.In the fifth chapter we made conclusions and brought forwardpolicy suggestions.