The Securities And Futures Commission Penalties, The Nature Of The Enterprise And The Quality Of Earnings

Earnings management through financial fraud is a common phenomenon in the securities market of China,resulting in the decline of the earnings quality.The investors will be misled by fraud information which cannot accurately reflect the actual financial situation and operating conditions.In order to protect the investors,the CSRC resolutely cracks down on such violations.According to statistics,the CSRC had deal with 2566 cases of illegal,which involved 685 cases of financial fraud,accounting for 26.69% in the period of 2011 and 2015.Based on sample data of A-share listed companies ranging from 2010 to 2015,this paper accesses the regulatory effectiveness of CSRC penalties under different enterprise attributes.Meanwhile,the empirical results are tested with the typical case of Nanjing Textiles.Meanwhile,the empirical results are tested with the case of Nanjing Textiles.The results indicate a close relation between the penalty probability and enterprise attribute.Specifically,the probability of being punished for state-owned companies is lower than that for non-state companies.Meanwhile,regardless of enterprise attribute,penalties reduce the manipulative accrual profits effectively,thus increasing earnings quality.Due to the reputation effect and selection effect,both state-owned companies and non-state companies intend to improve their earning quality after receiving penalties.In addition,the study of this dissertation also shows that the possibility of being punished is negatively related with net operating cash flow and firm size,but positively related with asset-liability ratio.And the earnings quality of state-owned companies is higher than the overall level.We also find that the higher the net operating cash flow is,the better the earnings quality will be.And sales growth,firm size and asset-liability ratio are inversely related to the earnings quality.Based on the above conclusions,this dissertation argues that the political connection of state-owned companies may weaken the independence of CSRC,reducing the regulatory effectiveness of CSRC beforehand.But CSRC penalties have a positive effect on earnings quality of both state-owned and non-state-owned companies.