The Impact Of Government Regulations On The Earnings Management Activities Of Chinese Real Estate Companies

Real Estate Industry is a fundamental industry in China. Its healthy development is crucial to the sustained, rapid and sound development of Chinese economy and the happy life of Chinese people. To help Real Estate Industry develop in a sound and sustainable way, Chinese government launched quite a few regulation policies in recent years. This study employed the event study method to research on the impact of government regulation policies on the earnings management activities of real estate companies in China during year2003-2012.After conducting the empirical analysis based on the accrual-based earnings management model and real earnings management model, there are three main findings in this study:First, there exist earnings management activities in Chinese real estate companies generally. Second, the release of government regulation policies does have impacts on the earnings management activities of real estate companies in China during year2003-2012. Third, different categories of government regulation policies have different impacts on the accrual-based earnings management activities and real earnings management activities of real estate companies in China.This study aims to help regulators better understand the reaction of real estate companies in China in terms of earnings management activities to the release of different categories of government regulation polices, so that they could launch more effective regulation policies in the future. Besides, this study also aims to help medium and small-sized individual investors better understand the earnings management activities of real estate companies in China and the impacts of government regulations on the earnings management activities of real estate companies in China so that they could make better investment decisions that are suitable to their investment goals and risk appetite.