The Research Of Influence In Earnings Management Of Private Listed Firms’ Political Association

Since China`s reform and opening-up policies were released, a huge change has happened to Chinese economic system. Under the circumstances, private enterprises were developing and getting benefits from the economic system. However, the system for private enterprises was far from perfect due to some limitations such as resources access difficulties, market access restrictions and so on. In this predicament, many private enterprises adopted a measure of political association for the sake of gaining access to more resources and opportunities for the benefits of enterprise survival and development. Generally privater enterprises adopted the way of earnings management to adjust company performance in order to avoid social responsibilities, market surveillance and government regulation. However, since the “Eight Provisions” was released in the December of 2012, the Politburo of the CPC is paying close attention to anti-corruption work. In addition, the “Eight Provisions” was included in the focal point of anti-corruption work in 2014. In terms of private enterprises, the benefits for them is dramatically decreasing. On the basis of accounting subject perspective, this thesis researches on the relationship between political association of Chinese private listed firms and earnings management under the background of the socialist economic system with Chinese characteristics and the anti-corruption work.This study clarifies correlation theory of political association and earnings management first, and summarizes relevant domestic and foreign literature. Then it analyzes different types of political associations and the the “Eight Provisions” effects on private enterprises. After that we propose two hypotheses. The study takes Shanghai and Shenzhen listed private companies from 2010 to 2013 as the research object and collects 1880 samples of the unbalanced panel data. Finally, the results prove that the “Eight Provisions” lower the earnings management level of private enterprise who has a political association after the policy was released; Meanwhile, the earnings management level of private listed firm who has the central political association is lower than the local government political association kind.The paper can not only enrich theoretical research of political association and earnings management, but also make a new direction for the research on the relationship between political association of Chinese private listed firms and earnings management. According to the research results, we suggest that Chinese private firms should build reasonable political association and set up a complete supervision and stimulation system. The paper also propose that government should strengthen the anti-corruption work, improve the development environment for private enterprises and financial information disclosure system for the sake of maintaining the order of the market economy development and guarantee the sustainable development of private firms. We also advise that investors should take rational analysis and deep consideration before investment.