Empirical Study Of The Impact Of Earnings Management On Related Party Transactions Of Listed Companies Based On The Allotment Motivation

Earnings management behavior is a common corporate behavior, and this behavior is particularly evident in the performance of China’s listed companies. There are many kinds of concept of earnings management, some of it is defined as:"Management earnings manipulation within the extent permitted by the Companies Act and accounting standards, or to reach a surplus by restructuring transactions and operating activities for the purpose of manipulation, but the reorganization of these transactions and operating activities will increase, or at least do not harm the value of the company."The definition more reflects the positive impact of earnings management. According to the the American scholar KatherineSchiPPer view that earnings management "by destination to get some private interests to interfere with the external financial reporting process, disclosure management", The definition more reflects the negative impact of earnings management. This paper argues that earnings management accounting methods and non-accounting methods companies use to change the financial report, and then manipulate corporate earnings eventually own interests or market value maximization behavior. For the purpose of earnings management of listed companies often used in a variety of ways, such as the provision and reversal of provision for impairment of assets, adjustment accruals accounting standards within and construct related party transactions. Therefore, the related party transactions has become one of the common ways of listed company earnings management.There are many way to related party transactions, such as associated with the purchase and sale of assets, restructuring, because the criteria for the definition of a related party is not very clear, In addition, the enterprise is very easy by constructing multiple transactions to related party transactions non dereference, related party transactionsthe the a certain concealment and complexity habit of, not easily identified as the regulatory authorities, so enterprises tend to be constructed related party transactions to achieve the purpose of earnings management. There are many motives of earnings management in listed companies in China’s capital market financing motive is particularly prominent. Listed companies in China’s capital market financing is limited, placing become an important channel for financing of listed companies and regulatory authorities for the allotment status clearly defined, does not meet the requirements of the company, can not be rights issue. Listed companies, it is easy to in the allotment motivation driven use of related party transactions to earnings management to meet the relevant provisions of the conditions of the listed companies net assets yield.Therefore, the extent of earnings management of related party transactions under the Rights Offering motivation to do a comprehensive analysis of the system to help improve the securities market regulations, rationalization and scientific promotion of market supervision, will also help to further standardize listingthe behavior of the company, but also can enrich the study of earnings management.In this paper, the study found the size of the transactions of public companies and earnings management degree of positive correlation, the larger the size of the related party transactions that a listed company, the higher the degree of earnings management, and secondly, in the model whether placement of shares of this company characteristics crossover study,explore whether listed companies allotment motivation will affect the relationship between the size and extent of earnings management related party transactions, and found that, compared with no allotment motives listed company, the upcoming rights issue of the company in the next year its associated transaction size and earnings management degreea significant positive correlation. That allotment motivation easier for companies to take advantage of related party transactions to earnings management.This article is divided into six chapters, each chapter following major elements:Chapter Ⅰ, Introduction.First introduces the research background and significance of the article. The second section describes the research ideas and methods of the article. Shanghai and Shenzhen A-share companies for the sample, using the modified Jones model to measure the extent of earnings management maneuverability accrued profit, build a model to study all samples associated with the transaction size and earnings management relations, and come to the related party transactions size and earnings management process significantly positive correlation, and, on this basis, then the sample data are classified in accordance with the firm characteristics, divided into the following year will be the placement of shares of the company and the company next year allotment, in the model of the foundation by adding dummy variables for firm characteristics, Examine whether the allotment motivation of related party transactions and earnings management relations. The study found that the allotment motivation of related party transactions and the relationship between earnings management and the implementation of the allotment of the company in the next year than that allotment companies are more likely to manage earnings through related party transactions.Chapter II Research. Introduces the research status at home and abroad on the relationship of the placement of shares, related party transactions and earnings management. More comprehensive domestic and international research on related party transactions on earnings management, the conclusion is also consistent, most of the literature that listed companies in order to achieve the purpose of earnings management, usually biased in favor of the use of related party transactions. Listed companies through tectonic related party transactions, the use of its complexity, concealment, transfer of profits, in order to achieve the purpose of profit or smooth profit. Home and abroad for the related party transactions and earnings management relations in the different motivations to be relatively small. Earnings management motives, most scholars agree that the motivation of the capital markets financing motive is the main motive of the listed company earnings management, capital markets, listed companies into financing is limited, additional shares and allotment.In addition, due to China’s relevant policies and regulations are more stringent, the listed company "Shell" is particularly valuable listed company in China, in accordance with the relevant provisions of the Companies Act, if the last three years of consecutive losses, then the securities regulatory department of the State Council will make a pause stock market decisions. Listed companies terminate the listing, the company is wasted scarce resources, the company’s interests, such as investors, managers, creditors, and other stakeholders will suffer a corresponding loss of profits. Earnings management to maintain the listing eligibility will be welcomed by China’s relevant policies and regulations, in order to obtain and keep a listing of eligible companies must meet the net profit requirements, IPO motivation and avoid loss of motivation, these are also listed companies to manage earnings motivation. Based on different motives, the listed company earnings management features and are not the same, the focus of the supervision of the regulatory authorities are not the same. This paper studies the allotment motives related party transactions and earnings management relations.Chapter III, the theoretical analysis. This chapter is divided into two parts. The first part is an important concept parsing. To explain some important concepts in the article. Such as share placements definition and purpose, the definition of related party transactions and related parties to define the meaning of the earnings management, motivation, and measurement methods. According to most of the literature study, also using the modified Jones model to measure the extent of earnings management and earnings management properties are characterized as negative, and therefore the need for more study of earnings management. The second part is the theoretical basis. This part focuses on the theoretical basis of the article. The theoretical basis of the related party transactions is not a lot, mainly from the point of view of the associated transaction costs of the inevitability of related party transactions, related party transactions not only can reduce transaction costs, but also can achieve economies of scale. The theoretical basis of earnings management, this chapter focuses on contract theory and information economics theory.Chapter IV, the study design. Article first proposed two hypotheses, assuming a positive correlation that related party transactions with the extent of earnings management, assuming the two joined the company on the basis of assuming a study the characteristics that companies are more than not allotment placement of shares of the company to implement next year likely to manage earnings through related party transactions. Secondly, the data selection and the setting of the variable. This paper is to study for2008-2010in Shanghai and Shenzhen A-share listed companies, excluding financial enterprises as well as the missing data to study the impact of the allotment motivation for listed companies, in order to avoid the influence of other motives, the paper removed2008-2010issuance of stock and IPO’s listed companies. Select2008-2010allotment of the30companies studied, the comparison with the control samples. In this paper, the modified Jones model to calculate DA (discretionary accruals profits) of the listed companies, and to measure the extent of earnings management. The data of this article from a number CSMAR database. Next comes the explanatory variables and the explanatory variables in this model as well as model represent meaning. Model at the end of this chapter, a descriptive statistical analysis.Chapter V, the analysis of empirical results. Major analysis of the regression results, which demonstrate the hypothesis.Chapter VI, conclusions and policy analysis. Articles summarize and draw relevant conclusions Finally, suggestions are related party transactions for listed companies in China’s current status of earnings management. First, to further improve the related party relationships and transactions standards; second, more stringent supervision of listed companies allotment motivation; third,to increase the supervision and punishment for earnings management of related party transactions.The main contribution of this paper isFirst,enriching the research on the impact of related party transactions on earnings management. The frequency and extent of the allotment policy from rigid to flexible, listed companies in order to meet the allotment policy taken by the related party transactions is likely to change, the extent of earnings management for allotment and also may vary, the most current literature the study is a policies issued previous trends-2006, The research the latest allotment policy introduced articles of related party transactions of listed companies on the impact of earnings management is not much, and the conclusion is not consistent, and this paper is data to study the latest allotment policy promulgated in2006, rich associationtransaction on the study of the impact of earnings management.Second,helping regulatory authorities in accordance with the the latest allocation policy adjustment allotment required listed companies, regulatory approaches and priorities. Due to the allotment policy changes, listed companies will take a different approach to reach different standards of allotment, the regulatory authorities must be based on changes in policy, timely adjustment of the regulatory methods and priorities.