Research On The Relationship Among Political Connection, Media Coverage,and Earnings Management Method

Since the new century,private companies have deveoped rapidly.However,private companies often face various troubles,such as financial constraint.Thus,private companies may build a political connection to get more opportunities and conveniences.The usual methods to get those benefits are rent-seeking or undergroud business,which might be illegal.To conceal these illgal behaviors,political connected companies may manipulate earnings.Earnings management will decrease the quality of earings information and disturb the captial market.Therefore,it is necessary to investigate the relation between political connection and earnings management method in private companies.Media,considedred as “the fourth party of power”,plays a great role in disclosing social phenomena and disseminating information.Scholars have focused on the role of media in corporate governance.Thus,it deserves to explore whether the media coverage may influence the earnings management method in private listed companies and whether it has different effects among potical conneted private listed companies.This thesis takes pirvate listed companies in small and medium stock market as the samples of the empricial research.The result shows that private listed companies may change the earnings management method after building a political connection.Media coverage could constain the accrual-based earnings management of the private listed companies but there is no relation between the media coverage and the real earnings management.Besides,with the media coverage,private listed companies which have political connection will change their eanings management method by dicreasing accrual-based earnings management and applying the real earnings management.The result indicates that media coverage palys a great role in restricting the accrual-based earnings management in private listed political connected companies.The results have a certain meaning that how to monitor the eannings management of private listed companies and enhance the media watchdog role in captial market.