A Case Study On The Earnings Management In A Private Placement Process Of C&W Technology

Since the reform of non-tradable shares,the private placement has become one of the most important ways for Chinese listed companies to carry out equity refinancing.Compared with other financing methods,the private placement has low distribution conditions,high price selectivity,limited use of raising funds,simple procedures,no requirements for the benefits.Therefore,listed companies are more inclined to private placement when choosing financing options.But in recent years,more and more listed companies in the process of private placement control the issue price,injected bad assets,inflated asset appraisal price and other means to carry out the benefit.At present,China's securities market related laws and systems are not perfect,at the same time the stock ownership structure of China's listed companies appears “a single large” phenomenon,the large shareholder has the relative information superiority and relative control over the company in the process of private placement,the major shareholders have the motive and condition of using earnings management to obtain more private profits in the process of private placement.In this paper,it is found that the large shareholders of C&W technology seek private profits through earnings management in the process of private placement.Listed companies have adopted different earnings management for different distribution objects.In a large shareholders inject assets into listed companies private placement,in the case of an injection of asset prices,the lower the price of a share offering the greater the equity that the big shareholders will gain in issuing new shares,C&W technology has carried out negative earnings management in the process of a large shareholders inject assets into listed companies private placement.When a private placement raises funds for other institutional investors,in the case of the number of new shares issued remains unchanged,the higher the price of new shares the more money will be raised,shareholders will get bigger for increase in per share of assets,C&W technology has carried out positive earnings management in the process of private placement of funds raised for other institutional investors.There are differences in the assets held by major shareholders under the two kinds of private placement of C&W technology,it is also different in the way of earnings management.In a large shareholders inject assets into listed companies private placement,C&W technology adopts the earnings managements such as adjustment of corresponding profit,correlation transaction,excess asset impairment loss,injection of non-conforming assets and overestimation of the price of injected assets etc.Since the financial report can only be changed from the company in the process private placement of targeted other institutions investors,C&W technology has adopted the earnings management mode of adjusting the accrued profit in this process of private placement.Finally,further examined its economic consequences of earnings management in the process of private placement based on the financial performance,it is found that the financial performance has not been improved because of the large shareholders of C&W technology have the motivation to maximize private profits through earnings management in the process private placement.Through the study of C&W technology,this paper put forward the suggestion that regulate private placement of listed companies to avoid capital market more unfair behavior and may consider problems toprovide reference for the future from the perfect corporate governance structure,strengthen the quality of injection of assets evaluation,standard information disclosure system and strengthen the protection for small and medium-sized investors four aspects.