Study On Earnings Management Based On Company Pangang Fantai

Earnings management is aimed to obtain specific interests by adjusting the disclosure of financial reporting data,within the limits permitted by accounting standards,therefore,some scholars say earnings management as disclosure management.Earnings management will damage the quality of accounting information,mislead the judgment and decision of information users,reduce the efficiency of capital market.Because of China's securities market regulation and regulatory requirements,companies to apply for listing with a certain degree of difficulty and high cost,resulting in China's listed resources are very valuable;at the same time,China's regulatory authorities will give special treatment on listed companies for two consecutive years of losses,the implementation of the delisting regulations on listed companies for three consecutive years of losses,which caused the stock listing or delisting are not market-oriented.In order to achieve the purpose of listing,some companies listed through earnings management.In order to keep the listed shell resources,some listed companies in special treatment period carried out earnings management.This paper reviews the previous research on earnings management and achievements,combined with the basic theory of earnings management: the principal-agent theory,asymmetric information theory,effective market theory,the author chooses Pangang Fantai as a case study to discuss the causes,means and results of earnings management of listed company,puts forward the countermeasures of preventing earnings management.In this paper,by means of case study,firstly,the background information of the case are introduced,then combined with the theory of earnings management and knowledge analysis,we get the deep reasons and conditions of earnings management,including(1)the principal-agent behavior and information asymmetry is the deep-seated causes of earnings management behavior;(2)the characteristics and regulation of China's securities market is an important incentive for earnings management;(3)China's corporate governance environment and governance structure provides the conditions for earnings management;(4)on an accrual basis of accounting provide operation space for earnings management;(5)for two consecutive years of loss,to retain the listing qualification is the main motivation;(6)to avoid institutional cash options exercise is the secondary motivation of earning management.Next,this paper analyzes the means of implementing earnings management of Pangang Fantai,including(1)reduction of current income tax by confirming deferred income tax assets;(2)toreturn inventory depreciation reserve and reduce the provision for impairment of inventories;(3)to reduce the amount of provision for bad debts;(4)to adjust the administrative expenses;(5)received huge government subsidies to improve the financial statements data;(6)plans to sell the assets to related parties to improve the financial data.Then,the paper summarizes the results of earnings management,including(1)avoid the risk of delisting by turned a profit in 2011 after continuous loss in 2008,2009;(2)benefit from the annual report of 2010,the company successfully avoided the cash option exercise in 2011;(3)after two consecutive losses in 2014 and2015,the company reluctantly plans to restructure assets in 2016.The company achieved short-term goals through the implementation of earnings management,but in the long run,the operation of the company has not be improved,so the enterprise should improve the management ability,it is a long-term strategy for enterprise development.For the deep reasons and conditions of the existence of earnings management,in the market economy environment,it is impossible to completely eliminate the problem of earnings management through the law,rules and manpower,then we should use effective means to prevent,minimize and reduce the harm of earnings management.At the end of this paper,combined with the causes and conditions of earnings management,the means of earnings management usually taken by enterprises,this paper points out that efforts should be made by three parties: the government supervision department,the main body of earnings management and the information user,and gives the specific precaution measures to curb the earnings management.