Transfer Of Control,Earnings Management And Operating Performance

Under the background of the economy transition in our country, most of transfer of the state-owned equity to private equity shows high privatization efficiency. At the same time, SASAC and other regulators often have banned low-cost transfer of state-owned assets. It implies that earnings management plays a vital role in the transfer of equity.This paper verify the short-view strategy, adopted by the company’s managers who is in charge of the transfer of control, to conduct the low-cost transfer through downward earnings management and the conspiracy with buyers, therefore leading a considerable operating performance which is actually embellished by the previous surplus management. At the same time, this research further distinguish the equity nature of the target company and the buyer.The previous research about the transfer of control and earnings management is solely considering the earnings management of the accrued items. Duet to the limitation, the empirical analysis of the profit management based on the practical activities is incorporated in this research to improve the previous progress. The equity transfer agreement of all the A-shared listed companies, whose equity transfer ratio is more than 1%, ranging from 2003 to 2014 is incorporated as research samples to conduct the regression analysis.This main conclusions of this research are as follows:(1) Under the control of expectations, companies are more likely to adopt the strategy of downward earnings management; (2) When the state-owned equity is transferred into the private equity, the company managers will conduct the practical and accrued profit management negatively; (3) the severer is the profit management of the downward accrued items is before the control transfer, the better is the performance of the company’s profit after the equity transfer, moreover, more significant is this the effect on the equity transfer from the state-owned company to the private. A conclusion can be attained that the efficiency of the privatization is a result of package for profit management.