Financial Condition, Investment Value And Operating Cash Flow Manipulation

Cash flow became an important indicator of company’s financial situation whichwas welcomed by the investors, government regulators or other company stakeholders,because of its establishment foundation of accounting information, its accountingestimates involving less subjective judgment, and its difficult manipulation. However, isit real that our country listed company cash flow information is true and reliable?Existing studies have shown that the manipulation of the cash flow information of thelisted companies also exist in our country. Compared to the other kinds of cash flow,operating cash flow is given more attention by numerous investors, and is manipulatedmore frequently. Although the existing literature includes the motivation of operatingcash flow manipulation, but it is analyzed theoretically. This paper focuses moreattention on specific motives such as company financial situation, or investment value,and intends to verify whether the financial crisis or low investment value may causeenterprises to carry out operating cash flow manipulation.This article summarized much domestic and foreign literature about operating cashflow manipulation, which include the existence of operating activities cash flowmanipulation, the motivation of operating cash flow manipulation, and the way ofoperating cash flow manipulation, etc. In order to test the hypothesis above, this articleselects658Shanghai A-share non-financial companies during2007-2012as researchsamples. With Reference to Zhang Jianguang’s(2010) research, this paper adopts hisoperating cash flow prediction model, in order to predict the company cash flow ofoperation activities and calculate the unexpected operating cash flow. Then, establishthe test model in order to detect if there is a positive correlation between companyfinancial crisis, severe investment value and the unexpected operating cash flow, andconstruct the financial crisis indicator and the investment value indicator on the basis ofThemis Financial Security Rating Data, and carry on the empirical test of the model.The results show that, when the company has financial crisis or severe investment value,there are significant and positive unexpected operating cash flow, which means that thelisted companies will indeed manipulate their operating cash flow when they are in apoor state. The more severe the financial crisis, or the lower investment value, the moreserious the degree of operating cash flow manipulation. To keep the robustness of theresearch conclusion, the article reclassifies the sample company, select the ST or PT companies as the sample companies which are considered to be facing financial crisis orsevere investment value, and take a regression test again. The robustness test results areconsistent with the results above.