An Empirical Study On Control Of Earning Management With In Listed Pharmaceutical Companies Under Fair Value Measurement

Fair value, as an accounting measurement attribute, was adopted again in the latest accounting standards in 2006 issued by MOF China who have clearly stipulated the definition, measurement and disclosure of Fair value in Accounting Standards 2014, Accounting Standards for Business Enterprises NO.39——Measurement of Fair Value. Thus, using fair value an accounting measurement attribute has been an inexorable trend. However, due to the imperfection of provisions of accounting standards and economical market, fair value measurement turns into a way for listed company to conduct control of earnings. With aging of population and improvement of people’s health awareness in China, domestic Pharmaceuticals industry is growing steadily with a bright future. Accordingly, author of this paper mainly discusses whether listed pharmaceutical companies take actions and methods of control of earnings under fair value measurements.On the basis of the theoretical foundation previously laid by research conducted in both home and abroad, the research methodology of this thesis is chosen to make analysis of the relationship between the fair value and the earning management. Followed is the conclusion of the influence imposed by the fair price management on the earning management. Ensuing is an empirical study on the above-mentioned issue mainly through the analysis of the A share listed pharmaceutical companies in Shanghai and Shenzhen stock markets between the year 2012 and 2015. In addition, a research hypothesis is proposed based on the theoretical analysis. Later comes the measurement of the annual earning management degree via the employment of the Extended Jones Model, together with the establishment of the testing model capable of demonstrating the relationship fair price item and the earning management. Next is the empirical study with setting the controlled accrued profit as the explained variable, the investment return, fair value variation, asset impairment and the non-operating income as the explanatory variable, and the listed company size and the risk level as the controlled variable. What comes later are a series of analyses on the earning management mole and the testing model with the software SPSS utilized, namely, the descriptive statistical analysis, correlation and co-linear analysis, as well as the regression analysis. Such elaborations are conducted for the purpose of exploring the inherent relationship between the relevant variables of fair value and the earning management and further confirming the hypothesis made in this thesis. Ultimately is the related suggestion concerning the policy-making based on the following discussion.A conclusion is drawn from the research that each listed pharmaceutical company have made commitment in earning management, which has a positive relation with the investment return, a negative relation with the asset impairment and an insignificant impact on the fair value variation. In addition, the result worked out in this thesis also gives an enlightenment to the recognition and restraining of the listed pharmaceutical companies’earning management with the application of the fair value.