China's Listed Companies Use Connected Transactions To Conduct Earnings Management Research

With the development of Chinese security market,the phenomenon of listed companies' earnings management is more and more widespread.But in recent years,the space of listed companies' earnings management by using the alternatives of accounting standards and accounting policies is limited,on the contrary,real activities earnings management with great concealment and complexity is easier to be adopted by listed companies.Based on the fact that most listed companies in our country were established by reforming of state-owned enterprises to appear on the market and original state-owned enterprises were reorganized to be group business,so there are complex related relations between listed companies and business groups,and it offers convenience to earnings management by related party transactions.Related party transactions become the means of manipulating profits in listed companies because of its characteristics such as concealment and complexity.It is bad for the effective allocation of social resources,interests protection of medium and small investors and the stable development of security market.So the study of related party transactions of listed companies' earnings management has great significance.On the basis of confluence analysis of previous theories about related party transactions and earnings management,this paper concluded the current situation of development trend and types of related party transactions through analyzing data of related party transactions in CSMAR A-share non-financial business 2013-2015.This paper specifically analyzed how listed companies use various related party transactions means to achieve expected report profit,and studied their internal motivation and external reason of using related party transactions for earnings management,it has specific meaning for regulating related party transactions for earnings management.This paper adopted document analysis method and case analysis method,and took a specific listed company BGRIMN Magnetic Materials&Technology Co,Ltd for example,and analyzed the behaviors of related party transactions for earnings management in its 2011-2015 financial statements,then evaluated the effects on profit,found that it had strong earnings management motivation.First it want to achieve the goal of turning losses into gains and avoiding delisting through selling asset to controlling shareholder.Second it stripped bad assets to controlling shareholder to stop loss in time and increase the return on investment,then bought high quality assets fromcontrolling shareholders to increase the revenues and profits during reporting time and improve surplus by related goods buying and selling in the future.At last,on the basis of case study and the internal and external reasons of related party transactions for listed companies' earnings management,this paper proposed pertinent measures of regulating related party transactions for earnings management.