Product Market Competition,Internal Control And Earnings Management

Since the 1980 s,the question of surplus management has been paid great attention to by the academic and practical circles,and it is common in the listed companies of our country.Research has shown that the information that measures the enterprise's performance will not be fair after being managed by surplus.On the one hand,it is difficult to measure the value of enterprises accurately by information users,and on the other hand,the surplus management of enterprises will harm the future profitability of enterprises.Since Roychowdhury(2006)proposed and studied real surplus management,the issue of surplus management has changed from the original issue of accrual management to the one of combined accounting information manipulation and real business activity manipulation,which has brought the study of earnings manipulation closer to the business reality of the company.However,an important question arises.What factors can effectively inhibit the accrual management of earnings and the management of real activity surpluses of listed companies? Especially real surplus management.As an important mechanism of corporate governance,internal control aims to ensure the quality of financial information.Generally speaking,the good operation of the internal control system can reduce the surplus management behavior to a certain extent.Whether internal control can actually inhibit the behavior of surplus management is also related to whether the necessary activities should be carried out around internal control scientifically and reasonably.However,many studies have not yet reached a consistent conclusion on the relationship between internal control and surplus management.Compared with the developed Western capital market,which has gone through a long process of internal control,the internal control of our country is still developing and improving.In the past 10 years since the promulgation of the 2008 Basic Standards for Internal Control and the 2010 Guidelines for Internal Control,there has been no unified conclusion on how effective the internal control management of enterprises is,especially whether it improves the quality of earnings information reporting in accounting.Therefore,it is a topic of both theoretical and practical value to further explore whether high quality internal control can effectively restrain the accrual and real surplus management.Modern competition theory holds that,in the present imperfect competition market,the enterprise's balance and liability,the company's profit plan decision will affect the enterprise's profit and the later development,while the enterprise's internal governance mechanism and the accounting's law and regulations are not perfect,resulting in the enterprise will choose to disclose the information after the multi-party balance in the face of the competition's unclear market behavior.The information disclosed by enterprises to investors may reveal the relevant private information to competitors,which reduces the competitive advantage of the enterprises.Therefore,the enterprises are likely to selectively disclose the information of the companies and manipulate the performance of the enterprises to maintain the competitive advantage and avoid competition.From the perspective of internal and external governance mechanism on surplus management,this paper examines the effect of external governance mechanism--product market competition and internal governance mechanism--on surplus management and the effect of internal control on surplus management.First,in the theoretical level,through the modern competition theory of the product market competition information hypothesis,the information disclosure of the proprietary cost hypothesis to the product market competition analysis;At the same time,through the theory of agency,information asymmetry and signal transmission,the internal control is analyzed,and the mechanism of product market competition and internal control on the management of earnings is clarified.Secondly,this paper uses the data of Shanghai and Shenzhen A-share listed companies from 2014-2016 as a sample for descriptive statistics and correlation examination,and then uses the model to carry out multiple linear regression analysis of the sample data as a whole.The influence of its cross effect on the surplus management of listed companies in China was investigated.The results of this paper show that:(1)there is a positive correlation between accrual management and product market competition,which shows that the competitive market will induce the enterprise's accrual management behavior.Increased competition has led to lower profitability,risk buffers and higher liquidity risks,with companies using more accrual management to counter threats.At the same time,the real surplus management cost is too high,more difficult,the operation cycle is too long,the listed company in the fierce competition market will prefer to use the accrual surplus management.(2)There is a negative correlation between surplus management and internal control.This shows that high quality internal control can effectively restrain its accrual management and real surplus management.To ensure the quality of financial information is one of the core goals of internal control.The more perfect the system of internal control,the more favorable it is to improve the quality of surplus information.(3)Internal control can effectively restrain the business accrual management behavior induced by product market competition.As an external governance mechanism,product market competition,although it has brought into play negative governance effect and induced the surplus management of enterprises,but it is also a pressure mechanism,which has become the driving force for enterprises to improve internal control,and effectively restrain the surplus management behavior of enterprises through good internal control of enterprises.Finally,according to the conclusions of this paper and the actual situation of the enterprises,the corresponding policy suggestions are put forward,and the limitations of this paper are pointed out,and further research prospects are put forward.