Research On Accrual And Real Earnings Management Before The IPO

The existing studies show that some companies for realizing the IPO smoothly tend tobeautify their financial condition through earnings management to meet therequirements.However,with the specification of Accounting Standards and efforts ofregulatory constantly, the operational space of traditional accrual earnings management willbe smaller and smaller, thereby it promotes managers to conduct real economic activity thatwhich is real earnings management for achieving the expected surplus targets.Analysisbetween accrual earnings management and real earnings management,we will explore theirimpact on corporate performance.And it has important practical significance in improving thesystem of IPO.On the basis of relevant theories, the article selected A-shares listed companies(2006-2010) in China as samples, using the accrual earnings management model and realearnings management model to study the company’s IPO earnings management behavior andits impact on company performance.Empirical results found that:(1)During the IPO process, the company to be listed uses both accrual earningsmanagement and real earnings management to achieve the performance requirements.Specifically, the company started the positive accrual earnings management on the secondyear before the IPO, and begin the positive real earnings management on the first year beforethe IPO.The degree of the earnings management on the IPO year becomes serious.(2)It is very different that the two ways of earnings management effect on the corporateperformance after the IPO.Accrual earnings management will lead to significant short-termdecline of the corporate performance, but it will not significantly affect the company’slong-term performance;The real earnings management is more covert,and it will affect thecompany’s long-term performance.However,this effect in the short-term is usually difficult tobe observed.In order to completely solve the problems caused by unreasonable or illegal earningsmanagement according to the empirical research findings,changing the existing IPO system iscrucial. On a macroscale, the IPO registration system should be gradually implemented,but itis integrant to collapse interests of the intermediary chain alliance at a micro level.All themeasurements are to achieve a sound development of Chinese capital market.