The Impact Of Management Motivation And Earnings Management Methods On Investor Sentiment

Under the situation of China’s current system and capital market environment, the management of earnings management motivation and the way of earnings management and investor sentiment have become a focus of attention from all walks of life. We adopt the method of normative research and empirical research to study the relation between earnings management motivation and way of earnings management and the investor sentiment and based on our unique system background.We first summarize the management motivation and earnings management research status and the investor sentiment based on the analysis of related literature. And then based on the contract theory, principal-agent theory, asymmetric information theory, signaling theory, expectancy theory we analysed the impace of management motivation on earnings management mode and investor sentiment. And at last we verified the mediation effect of management earnings management motivation to investor sentiment, the interaction mechanism three aspect, and then put forward empirical research hypothesis; The impact of management motivation and earnings management methods on investor sentiment is studied based on9581samples from listed firms for the period between2006and2011. This paper examines the influence of management motivation and earnings management methods on investor sentiment and intends to study how management motivation influence REM and earnings management methods, how REM and earnings management methods influence investor sentiment. The empirical results indicate that management use REM to manipulate the earnings in order to turn a profit, avoid loss, refinance, and change executives. The listed companies with higher executive compensations intend to use REM. However, making big profits by using REM activities is not a universal phenomenon because capital market in our country is not perfect enough. This paper also finds that when a company makes big profits using REM activities, investors are optimistic. While a company uses AEM activities to increase earnings, investors are easy to recognize AEM and then they will be pessimistic.