Research On The Listed Companies’ Real Earnings Management Among Manufacturing Industry On ChiNext

The successful establishment of ChiNext provided an important passage for small companies and emerging companies in China to acquire extra equity financing.Those listed companies on ChiNext in the Shenzhen Stock Exchange mainly operate in the scope of high-tech manufacturing which brings them with highly potential increasing in business.However,what they often face up with are early startup problem and operating performance problem. With both the implementations of the Sarbanes-Oxley Act and the new accounting principles,the listed companies are less likely to use accruals earnings management to polish their financial statements.They adopt real earnings management as an alternative.One phenomenal character for real earnings management is that it affects company’s future cashflow through real business transactions in three different ways,operating business,investing business and financing business.The main methods that the companies use to manipulate the accounting profits can be concluded as follows:1.Expanding the company’s sales credit in an arbitrary way.2.Overproducting to scale back the company’s per unit cost.3.Winding down the company’s discretionary expenses,especially like R&D disbursement.4.Using the related parties transactions.5.Exploiting the company’s extraordinary gains and losses.What I mentioned above could pose great threat on the manufacturing industry on ChiNext.My dissertation is based on the foreign and domestic theories on real earnings management.I chose 252 listed companies in the manufacturing industry on ChiNext as a sample by the ending day of December 31.2013,then used the empirical model to analyze and finally got the overall regression graph that could be regarded as a standard to identify individual company’s abnormal fluctuation.As for the abnormal fluctuation,we need pay appropriate attention on that.For this kind of attention is mainly used in the auditing such as the company’s risk assessment and its ability of going on,then used for investors to assess the company’s profitability,and for the regulatory institutions to identify the early risk of the conpany.At last,I picked up 1 company out of 252 companies as a case to analyze real earnings management activity.This company,located in Zhejiang Province is a high-tech enterprise.It is mainly engaged in photovoltaic power generation and supply,independent research and development as well as sales of solar panels and other related products.In 2010,this company was successfully listed on ChiNext in the Shenzhen Stock Exchange.It is not only in one of the emerging industry but also in one of the leading industry in China.In the process of analyzing the company’s real earnings management,I targeted on the company’s extraordinary gains and losses,R&D expenses,manufacturing cost and the company’s discretionary expenses.I drew an appropriate conclusion of myself,then presented the developing and planning proposals for the company.The last section of my dissertation is to summarize what I’ve been studying on and points out where the innovation of my work is.Although my dissertation has its shortcoming,I am still looking forward to making it better.