Research On The Impact Of Corporate Risk-taking On Earnings Management

As a common phenomenon of China’s capital market,earnings management is the behavior of the enterprise management authorities to adjust the disclosed accounting earnings information of enterprises in order to maximize the profit.Because the design of the accounting system gives the power to manager who can use the professional judgment to choose the policy method,the idea of fundamentally avoiding the earnings management behavior can not be realized temporarily.So we need to fully understand the company’s earnings management behavior,such as the degree of earnings management,the motivation of earnings management,etc.,to help the company’s shareholders and market investors understand company real earnings information hiding under the earnings management behavior.Thought study on the motivation of earnings management,we can found whether earnings management is based on the contract(payment)or debt contract,extra income from capital markets,or avoiding regulatory and tax motivations,its essence is that the earnings pressure eventually lead to the earnings management behavior.Therefore,considering the consistency of risks and benefits to some extent,we believe that there is an inevitable link between the risk taking of the company and the earnings management.According to the existing research literature,there is a certain correlation between the risk taking of the company and the earnings management,and the risk level of the listed company can influence the degree of earnings management.However,previous studies on the relationship between risk taking and earnings management is based only on the company’s financial data,and risk taking index calculation is based on the current and previous company status,without considering the contribution of the future changes to risk bearing level;The study of earnings management generally refer to accrued earnings management,and it rarely involves real earnings management that be more and more implemented recently;The choice of research model is limited to linear model,without considering the impact of the cost rise resulting from the external supervision of the company and internal corporate governance to the earning management with the rising of risk taking,so can’t help us fully understand the effects of risks taking on earnings management.Therefore,we fully consider the different effects of various factors on the earnings management with rising of the risk taking level,apply PSTR nonlinear model,use two kinds of risk taking measure which are based on accounting and market data,empirically explore whether the company’s risk taking level can affect the accrued and real earnings management degree,and this effect is how to performance.that is we use earnings management as explanatory variables which is presented with accrued earnings management and real earnings management,use risk taking as the explained variable which is presented with two types of risk measure based on accounting and market data.The empirical results show that,firstly,the risk taking level of the company affects the degree of accrual management,and there is a significant non-linear positive correlation between the two.When the company’s risk taking at a higher level,which is beyond the scope of the stakeholders to accept,due to the pressure of the capital market’s target profit,or to avoid being punished by shareholders of the stakeholders,managers have a strong incentive to implement accrued earnings management;And once the company’s risk taking is in normal acceptable level,due to operational stability,under the pressure of regulatory and costs,the managers generally don’t choose accrued earnings management.Secondly,there is a significant linear positive correlation between the company’s risk assumption and the level of real earnings management.When the company’s risk taking at lower levels,the degree of real earnings management is small,as the company increased the level of risk taking,the degree of real earnings management is also increasing,the effect of risk taking on real earnings management will not change.Results of this article provide new evidence for a better understanding of the relationship between enterprise risk tasking and the earnings management,which shows that the company is likely to exist a certain degree of earnings management when the company’s risks are in a high level.This shows that the government should strengthen regulation and investors should be more alert to corporate earnings management.Finally,this article put forward the corresponding policy recommendations from strengthening government supervision,restraining opportunistic earnings management improving the information asymmetry,and establishing risk assessment,control and management integration system.