An Empirical Research On Earnings Management Of Listed Commercial Banks In China

In the scope of accounting standards, earnings management is a behavior that business managers, consciously and purposely, make use of imperfect accounting standards and the selecting right of accounting policies and make an effect on the data contained in the financial report to achieve the maximize of the business value and their own interests. It achieves through accounting information disclosure, accounting and other ways. But the change of every accounting standard brings potential opportunities on one hand, and impacts earnings management tool on the other hand. So, researches at home and abroad have widely concerned about the impact of accounting standards on earnings management.But overview of previous studies, because of the particularity of the business nature and management function, generally commercial banks have not regarded as research objects. However, commercial banks play an important role in economic development. Its earnings management behavior study has a crucial role in maintaining its liquidity, security and financial stability of the country. Also, in2006, the published accounting standards largely adjusted the provisions of the larger financial asset. Undoubtedly, those commercial banks with a large number of financial assets will face a new challenge.Based on it, this thesis chooses commercial banks as the research objectives. Firstly, based on the analysis of special tools and special motivation for the earnings management of the commercial bank, we believe that its earnings management has been affected by the new accounting standards on loan loss reserves and fair measurement. Secondly, this thesis takes an empirical test to the earnings management behavior of the listed commercial banks to verify if it is suppressed by the new accounting standards. Thirdly, aiming at the three aspects, fair value gains and losses, the disposal gains and losses of available for sale financial assets, and loan loss reserves, we study that the earnings management of commercial banks is therefore somewhat inhibited or emerge new opportunities. This thesis can be divided into five parts as follows:Part one is introduction. This part describes the background of research, the purpose and significance of research, the research methods, the content arrangement and the main innovations.Part Two is the theoretical overview and review of the literature. This section reviews the literature from four sides:the research on earnings management of commercial banks that based on smooth earnings, the study of earnings management of commercial banks that based on contract theory, the means of earnings management of commercial banks, the factors that limit earnings management of the commercial banks.Part Three is the current situation of earnings management of commercial banks in China. Based on the theory of the unique motivation of earnings management of commercial banks, the unique tool of earnings management of commercial banks, further analyzing the changes related to the earnings management of commercial banks and its impact.Part Four is the design of the research. This part mainly consists of three aspects:Empirical analysis of the existence of earnings management of listed commercial banks in China, Empirical analysis of using fair value to implement earnings management, Empirical analysis of using loan loss provisions to implement earnings management. Then it proposes respectively the research hypotheses at first. Then it introduces the method of the earnings management research of commercial banks, sample selection and data collection and selects the study variables, and then model construction and the final results of the empirical analysis.Part Five is conclusions, recommendations, and follow-up policy outlook. This section includes a statement conclusions, policy recommendations, summarizes the shortages and then indicates further research directions.Through theoretical analysis and empirical testing, we draw the following findings:Firstly, the Jones Model is constructed on the basis of smoothing profits of commercial banks. We select market-oriented commercial banks as examples, describing the extent of earnings management quantitatively. The results show that under the new standards the earnings management of commercial bank still exists. However, after the implementation of new accounting standards, there is no enough evidence to show that its earnings management behavior is inhibited.Secondly, we constructed regression model to test the relationships between fair value gains and losses, the disposal gains and losses of available for sale financial assets, and earnings management. It was found that the disposal gains and losses of available for sale financial assets were significantly positively correlated with earnings management, fair value gains and losses and earnings management does not have a meaningful correlation.Thirdly, using the specific accrual model find that China’s listed commercial banks use loan loss provisions to implement earnings management.