A Study On The Impact Of Tax Planning On Earnings Management In Enterprises

With the sustainable development of capital market, earnings management and taxplanning have become eternal topic of enterprise financial management activities. In avery long time, scholars both at home and abroad made researches on tax planning andearnings management independently. In recent years, some scholars begin to pay closeattention to cross-over study on tax planning and earnings management. But they regardtax planning merely as a means of earnings management, without considering that taxplanning will also have relative effects on earnings management. Tax planning andearnings management sometimes may come into conflict due to different goals ormotivations. From the research status of domestic and overseas, domestic scholars’research on the impact of tax planning on earnings management is mostly in thetheoretical analysis stage, empirical study is quite scarce. While foreign scholars’ studybetween the two is still at the exploration stage, has not yet formed a complete researchsystem. Therefore, as a breakthrough point, this article focuses on the impact of taxplanning on the degree of the enterprise’ earnings management and the impactdifferences under different property rights.Decisions on enterprise’ earnings management always need to make trade-offbetween earnings management benefit and earnings management cost, and the incometax cost constitutes a very important part of the earnings management cost. Therefore,the corporate tax burden, especially the income tax burden, is a key factor which affectsearnings management and corporate related economic behaviors. Moreover, taxplanning is a kind of management activity influencing the actual tax burden ofenterprises, which to some degree affects the enterprise’ earnings management behavior.Consequently, a deep research on the relationship between the two contributes tounderstanding the economic consequences of tax planning on earnings management.By applying the basic theory of accounting, management and economics, thisarticle investigates the impacts of tax planning on the degree of enterprise earningsmanagement. First of all, this paper reviews the related researches both at home andabroad, including the study on the influence factors of earnings management, taxplanning and the influence of tax planning on earnings management. Secondly, thispaper states the basic theories: contract theory, information asymmetry theory and effective tax planning theory. Thirdly, the influence mechanism of tax planning on thepositive earnings management and the negative earnings management activities wereanalyzed, then the various influences of tax planning on the degree of enterpriseearnings management under different property rights were further discussed. Finally, inorder to validate academic analysis, this paper uses the data from2009to2011ofChina’s A-share listed companies and carries on fixed effect model analysis.The conclusions are as follows:(1) the impacts of tax planning on the degree ofenterprise earnings management in different directions are remarkably different;(2) forenterprises under different property rights, the impacts of tax planning on the degree ofearnings management are markedly different;(3) enterprise’ earnings managementbehavior depends on other factors apart from tax planning, such as enterprise scales,financial leverage and profitability. Additionally, these factors differ in differentdirections of earnings management. According to the above results, this paperputs forward suggestions to the enterprise for implementations of tax planning andearnings management activities and to the government for regulations of the two.