Listed Companies In China And Study On Earnings Management Real Accruals

Earnings management can be classified as accruals management and realearnings management. Accruals management involves in choices of accountingprinciples which try to obscure true economic performance.Real earningsmanagement occurs when managers undertake actions that change the timing orstructuring of an operation,investment,or financing transaction in an effortto influence the output of the accounting system.The article is based onclassical Jones model to calculate the proxy variables of earnings management,and analyzes its influence on accounting data from the ways of controlmeasures.Through the establishment of empirical model,the articledemonstrates the behaviors of three kinds of manufacturing companies ofspecial motivations, which are remaining profitable, allotment shares andsustaining economic growth. The results show that the manufacturing companieswith the three special motivations will not only use accrued items but also theway of real activities manipulation. And through the analysis of real earningsmanagement, we can conclude that the enterprises which use this method willpresent a lower operating cash flow, higher production costs and lowerdiscretionary spending.If a company deficits for three consecutive years, it will be ST.So manystudies have proved that in order to avoid losses,many companies existearnings management.As for it,this article considers ROE between0～1%hasa greater likelihood of earnings management. Securities regulatory commission,on March15in2001, ruled that only a listed company for three consecutiveannual weighted average return on equity are not lower than6%can apply forallotment.If the managers predict the current profit cannot meet therequirements of allotment,they will carry on earnings management activitiesin advance.So this article considers the return on equity between6%～6.5%.This of the company perhaps has allotment motives, and may be morelikely to have earnings management. If a enterprise’s profit rising steadilyyear by year, the external stakeholders will think it has a better growth, aless risk.Steady profit not only can improve the company’s share price, alsocontribution to the cooperation with other units such as trade, finance and soon, further to reduce the cost of contrasts. So the article argues that acompany with mild increasing profit is likely to be on behavior of earningsmanagement. Manufacturing as a traditional industry, includes purchasing, production and sales process. Compared to other industries, such as socialservices, manufacturing is involved in is a longer chain.So we choosemanufacturing industry and choose the companies which have specialmotivations of remaining profitable, allotment shares and sustaining economicgrowth,to better illustrate the behaviors of earnings management.