Impact Of Information Disclosure Of Internal Control Of Listed Companies On Earings Management

One of the objectives of internal control is to ensure the reliability of financial reporting.Information disclosure of internal control is a reflection of the internal control system andactivities, and it is the objective requirement of the corporate shareholders and externalinformation users in the capital market to understand the business operating results andfinancial position. At the same time the development of internal control system and theinformation disclosure system of internal control will effectively improve the development ofthe stock market and promote the development of listed companies in the organization. WithChina entering the mandatory disclosure phase of internal control, in addition to accrual-basedearnings management, an increasing number of listed companies would like to choose a moresubtle way of real earnings management. However, compared to the accrual-based earningsmanagement, real earnings management has greater adverse effect on the future operation oflisted companies. This paper uses the method of the combination of standardized research andempirical research to study the impact on earning management of listed companies by theinformation disclosure of internal control. After introducing the related study and the basicconcepts and theories of internal control, this paper proposes three hypotheses, and setaccrual-based earnings management and real earnings management to be dependent variablesand the information disclosure of internal control to be the explanatory variables. Combinedwith the control variables, this paper constructs the regression model of variables. This paperselects the listed manufacturing companies of A-share board of Shanghai and Shenzhen in2012when mandatory information disclosure of internal control starts as samples, and usesstatistical methods of multivariate linear regression model to test proposed empiricalhypothesis, and comes to the corresponding conclusions that high level of internal control willhelp to decrease the extent of earnings magement. Finally combined with the status of China’sinformation disclosure of internal control this paper proposes appropriate policyrecommendations of standardizing the information of internal control, the limitations of thisstudy and the prospect of future research.