A Study On The Earnings Management Of Classification Shifting And Its Market Reaction Test

Earnings management in listed companies is quite common,and it has always been the research focus of scholars both at home and abroad.In recent years,scholars abroad have found a new way to manage earnings,that is classification shifting,which adjusts earning structure to adjust core earnings,a large number of researches based on the mature European and American capital market show that classification shifting is the main way to inflate core earnings.However domestic scholars pay a little attention to it.Whether the listed companies in China use classification between non-recurring profit&loss and recurring ones to manage core earnings?If so,what are the operation direction and specific operation methods,and whether investors in our country can effectively identify it?In the face of problems above,this article selects Shanghai and Shenzhen A-share listed companies from 2009 to 2013 as research samples,based on the asymmetry information theory,the efficient market hypothesis and so on.To explore the existence of classification shifting in empirical research,we use the models by McVay in 2006 for reference;then we use the event study method,that is BHAR model,to further explore whether investors in our securities market can identify such mean of core earnings management.The empirical results show that the unexpected core earnings and non-business expenses is significantly positive,while it is significantly negative between non-operating income or non-recurring parts of investment income,which means that classification shifting in Chinese listed companies truly exists,and manages would exaggerate or smooth core surplus to achieve different intentions;At the same time,we document arbitrage results by year are positive in most cases,but sometimes are negative,that is to say,rational investors can often obtain excess returns through arbitrage groups,which means that Chinese securities investors would be misled by manipulating information through adjusting of surplus structure,we can not completely identify it.Moreover,in the robustness test,we found that even redefining the core surplus or taking use of the CAR to build regression model,previous research conclusion remains valid.Finally,according to the results of this article,put forward some feasible suggestions to the standard setters,regulators,auditors and investors.