Study On Picking Star Of *ST Companies By Earnings Management

With the development of capital market in China, relevant regulatory authorities issued a series of laws to regulate and supervise the market. Delisting risk warning system as a particular delisting system of China, aims to remind the * ST companies to improve business performance,and Prompt relevant investors to take notice of the market risk. However, this system in the positive role at the same time, also caused a lot of new problems. Because the shell resource in our country has been relatively scarce, so there a phenomenon that many * ST companies operate profit by earnings management for the "shell".Although relevant departments constantly revised * ST system, but the above phenomenon has not been eliminated,even getting worse. Based on this phenomenon, in 2012, the Shenzhen and Shanghai stock exchange issued new stock listing rule. After seven revisions, it is vital significance that whether the new rule can change this behavior that * ST companies use earnings management to Remove star, or only Produce new earnings management means for investors and regulators.The paper bases on the background of new rule in 2012, and earnings management relevant literatures and theories, takes the *ST Xinjiang Talimu Agriculture Development CO.LTD as an example to explore the motivation that * ST companies use earnings management to operate profit, and the main means of earnings management; this paper focuses on that whether *ST companies will be more inclined to do earnings management through non-recurring profit and loss items.under the background of new rule in2012,whether the change of new rule makes it easy that the abnormal stock returns to normal or more difficult. finally the article offers relevant suggestions according to the problem, so that it can promote the development of the securities market of our country.Through the study, the paper finds: in 2012,the new regulation removes this measure index that net profit is positive after deducting non-recurring profit and loss items,its essence is more advantageous to the abnormal stock return to normal, and it intensifies the tendency that *ST companies do earnings management by non-recurring profit and loss items to a certain extent. The new stock listing rule dose not entirely restrain this behavior that *ST companies use earnings management to remove star. The authorities should further adjust relevant policies and the investors should not dependent on the information provided by financial statements, and they ought to know more about the real business situationsThe article finally draws the following conclusions: First, the direct purpose that * ST companies operate profit by earnings management is that the *ST companies stop annual loss, and avoid the suspension of the listing for loss of three years continuously. Second, although the excessive earnings management behavior of * ST companies is dishonest performance,but the fundamental is relevant directly to the delisting system of our country.Third, the behavior that*ST companies pick star by earnings management always repeates,it is the combination of a variety of reasons from stock market, the relevant departments should improve it from various aspects, such as the accounting policy, the securities market,legal constraint to audit institutions, professional ethics of accounting personnel and so on.