Media Credibility, Media Coverage And Earnings Management

Earnings management is a phenomenon prevalent in the company, which reflects the company’s internal control deficiencies. When factors that can control company’s behavior of earnings management expand from internal to external, the media gradually attracts people’s attention. Especially today when newspapers, television, Internet and other media have become an important source of information about the company, the corporate governance role the media coverage played has attracted more and more attention. Scholars get different conclusions from different angels to study it. When they do their research, they will only select negative reports or positive reports, ignoring the tone of the reports may have effects on earnings management. Media credibility refers to authority, authenticity and influence, which will also affect the relationship. The paper will research the relationship between media coverage and earnings management from the tone of media, negative or positive. Then group the negative media coverage and positive media coverage depending on media credibility to research the effect it will have on the relationship.Normative analysis and empirical method are used in the paper. The earnings management as being explanatory variables, negative reports and positive reports as explanatory variables, empirical methods are used to test the relationship with earnings management and compared the outcome. Divide the negative reports and positive reports into "state-owned official background" and "non-state official background" depending on media credibility, then do the regression by group to test the influence of media credibility on the relationship between media coverage and earnings management. The results showed a significant negative correlation between negative reports and earnings management, and the corporate governance can be improved. Positive reports can’t reduce the degree of earnings management, but will promote it slightly. After grouping, the negative reports from the "state-owned official background" media can reduce more earnings management than from the "non-state official background" media. The positive reports from the " state-owned official background" media will not significantly promote earnings management, but the "non-state official background" media will.The paper is divided into six chapters. The first chapter introduces the research background, significance, ideas, frameworks and innovative points. The second chapter is literature review, combing the existing literature and commentary. The third chapter is theoretical reasoning and assumptions. The fourth chapter is research designation, showing the sample selection and data sources, variable design and model building. The fifth chapter is empirical results and analysis, with the four empirical steps, descriptive statistics, correlation analysis, regression analysis and robustness tests. The sixth chapter is conclusions and policy recommendations, it will give the research conclusions and some suggestions.The study will richer the literature on the corporate governance of the media coverage. The media coverage with different tone and credibility will have different effect on earnings management. This study will help media play a better role in corporate governance, and make related departments think on how to improve the media credibility. It will give some suggestions to strengthen the role of the mass media in our country.