Correlation Research Between Earnings Management And Company Value Of Small And Medium-sized Enterprise

Since reform and opening up, small and medium-sized(SME) enterprises rapidly developed in our country, and the number accounted for over 90% of the total number of companies, the created values accounted for about 60% of gross domestic product(GDP), the provided jobs accounted for over 70% of the total number of jobs. However, the development of small and medium-sized enterprises is limited by various factors, especially in financing. The SME plate launched Shenzhen stock exchange with the approval of the state council in May 2004, which provides rapid financing channels for SME enterprises and extensive development platform. The SME enterprises play an important role in promoting national economic growth, easing employment pressure and increasing domestic import and export. The economy growth is closely related with the contribution of SME enterprises, the values of SME enterprises determine the contribution degree. Therefore how to achieve sustained, stable growth in SME board and promote the development of the national economy is an important issue.Earnings management has two sides. Appropriate earnings management promotes the value of the company, and excessive earnings management will damage the value of the company. To determine whether earnings management behavior appropriate depends on the behavior risk of increasing the value of the company and the behavior of trade-off between falling values of the company. In other words, if the company’s overall value increased, earnings management behavior is appropriate. On the contrary, it is excessive earnings management behavior. However, due to the high-speed development of SME enterprises and the defects of securities market, earnings management problems stand out. SME companies, such as Green Land, City Landscapes, Annie Shares, occurs violations because of excessive earnings management. Therefore, to improve the value of the company, it is necessary to regulate the behavior of SME companies in earnings management.Our research aims at exploring the relationship between the value of SME companies and earnings management, and judges the appropriateness of SME companies in earnings management. Thus it guides companies to appropriately manage the earnings and provides reasonable suggestions to promote the value of the company. On the basis of domestic and international research, this paper selected 217 small plates listed on the Shenzhen Stock Market, and adopted the modified Jones model to calculate manipulate accruals. The ratio of its absolute value and size of the company is regarded as a proxy variable for earnings management, while Tobin’s Q is selected as the value of the company’s proxy variables. The results showed that earnings management and corporate value are significant positive correlation, indicating that earnings management behavior of small board listed company is appropriate, which can enhance the value of the company and long-term sustainability.