Traditional Culture, Real Earnings Management And Stock Crash Risk

The world's major stock markets experienced 57 crashes with a 20% drop from 1959 to 2015,and the Chinese stock market in recent years is also ups and downs.Stock price crash will directly affect the interests of enterprises and investors,and even severely impact the entire market economy,hindering the development of society.Therefore,more and more scholars have studied the risk of stock price crash,explored its causes,influencing factors and economic consequences,in order to find preventive measures against stock price crash to stabilize the development of market economy.The promulgation of the Sarbanes-Oxley Act(SOX)in 2002 and the implementation of the new accounting standards in 2007 led many scholars to focus on real earnings management.Because accrued earnings management is difficult to be implemented under the institutional constraints,while real earnings management is easier to hide from auditors and regulators in an imperfect legal system.The manipulation of real earnings management will increase the opacity of corporate accounting information,and when the opacity of information reaches a certain threshold,stock price crash occurs.Under the constraints of the formal system,the real earnings management still exists.Then whether the informal system as a supplementary mechanism of formal system also has an impact on the real earnings management behavior,about which the previous research rarely mentioned.Based on this,this paper introduces the traditional culture,studies its impact on real earnings management and then explore whether it can inhibit the impact of real earnings management on the stock price crash risk.Traditional culture has its unique status both in ancient and modern times,and it plays an important role in economic development and social progress.At the micro level,traditional culture can form a social normative role through individual beliefs and values,promote self-regulation through the cultivation of moral sentiments,and influence the earnings management and financial irregularities through individual risk aversion.This paper analyzes the impact of real earnings management on the risk of stock price crash firstly,and then it studies the effect of traditional culture on the real earnings management.On this basis,this paper explores the impact of traditional culture as a regulatory variable on the relationship between real earnings management and stock price crash risk.This paper is divided into six parts.The first part is the introduction,which mainly introduces the research background and significance of this paper,summarizes the research content and the paper frame,and describes the research method and the innovation of this paper.The second part is the literature review,including domestic and foreign scholars' research on the risk of stock price crash,the relationship between earnings management and risk of stock price crash,the relationship between traditional culture and real earnings management,and the relationship between traditional culture and risk of stock price crash.On the basis of literature,this part summarizes and comments on the current research situation,to determine the starting point of this study.The third part is the related concept and the theoretical basis,introducing the definition of the risk of stock price crash,the real earnings management and traditional culture,and carries out the theoretical analysis according to agency theory,asymmetric information theory,effective market hypothesis and moral ethics theory,to lay the theoretical foundation for the empirical research below.The fourth part is research hypothesis and research design,which puts forward research hypothesis based on the theoretical basis,selects the sample,defines the variables and designing the model.The fifth part: empirical analysis.First of all,this part tests the impact of real earnings management on the risk of stock price crash and the impact of traditional culture on real earnings management using the least squares regression.Secondly,it examines whether the strength of traditional culture has an impact on the relationship of real earnings management and the risk of stock price crash,according to the coefficient on the interaction of the strength of traditional culture and real earnings management.Thirdly,this part classifies traditional culture into 3 groups(Buddhist culture,Confucian culture and Taoism culture)for further analysis.Finally,robustness analysis is carried out by redefining real earnings management to strengthen the conclusion.The sixth part: research conclusion,suggestions and future prospects.Based on empirical analysis above,this part summarizes the conclusion of this paper,puts forward relevant suggestions,and points out the limitations of this paper and prospects for future research.The research conclusions of this paper are as follows:(1)Real earnings management is significantly positively correlated with the risk of the stock price crash.The greater the real earnings management,the higher the risk of future stock price crash.(2)The strength of traditional cultural is significantly negatively correlated with real earnings management.The more the national temples around the company,the less the behaviors of real earnings management.(3)The strength of traditional culture can weaken the relationship of real earnings management and the risk of stock price crash.The greater the strength of traditional culture,the smaller the impact of real earnings management on the risk of stock price crash.This paper can enrich the research of the influencing factors of the risk of stock price crash and real earnings management,and help reduce the real earnings management behavior and enhance the transparency of accounting information.In particular,China's economy is now in the “new normal” period,in which the development mode of economy has shifted from high-speed stage to high-quality stage.The 19 th session of national congress of the communist party of China proposed that we should establish high cultural awareness and cultural self-confidence.Under the condition that culture is increasingly valued and the formal system is still not perfect,this paper studies the role of traditional culture in corporate governance from the perspective of informal system,and provides a full and practical basis for investors to make correct decisions and companies to prevent the stock price crash.