The Research Of Zhangzi Island Scallop Events From The Perspective Of Earnings Management

Earnings management as a frontier research topic of accounting profession rose in the 1980 s, for now it’s still an important area of accounting theory research. Since the construction of capital market in China from the 1990 s, the capital market expands unceasingly, the number of listed companies increase rapidly. Because each company management level is uneven, as well as the strict performance pressure and the unique ST warning system in Chinese securities market, the motivation of the earnings management for some listed companies is very strong, and also related to the company’s earnings management behavior. For example, the listed company with “ST” often make the use of a artifice in earnings management called ”take big bath”, that means the company move the losses and expenses of a few years into one year. So that, the company can avoid the delisting because of consecutive losses. In 2014, Zhangzi Island Group make a huge number of Impairment and write off of its biological assets—scallops, which arouse public speculation. As the condition of the biological assets in the sea were not easy to be checked, so it’s hard to say it caused by the natural disaster, or it’s just artificial arrangement.Out of interest in the case, the writer discovers that the Zhangzi Island made a huge losses in 2014,but the years close to 2014 always maintain the micro surplus condition, which fits the characteristics of “take big bath”. So, the writer decided to analyze the Zhangzi Island “scallops events” From the earnings management perspective. This paper started with the introduction of the background and significance of this research, then reviews the literature of earnings management, Based on the theoretical knowledge, this paper takes Zhangzi Island “scallops events” as case, make a systematic analysis about the “premise condition”, “motivation” and “recognition” of Zhangzi Island’s earnings management. And there are some special analysis to the important suspects. Based on these analysis, the writer found Zhangzi Island Group has sufficient conditions and motivations to manage the surplus, and had doubt on relevant financial processing, like “Huge number of biological assets cancel after verification”“Capitalization of interests” and “High cash dividend”. Scallops events may be just a periodic finish for Zhangzi Island’s Earnings management. Finally, in order to strengthen the supervision for similar earnings management behavior, the author based on the problems found during the case, made some targeted Suggestions for improvement from the different angles like the company, market, Third party of society and the government.