A Case Study Of Corporate Earnings Management Driven By Performance Commitments

After the financial crisis,all enterprises in our country are restoring their vitality through economic transformation.But the transformation of enterprises is facing many difficulties,and the competition is very fierce.If we want to survive in the competition,we need to develop our strengths and avoid our weaknesses.Our own advantages need to be integrated with the new era and new areas.Only in this way can we broaden the scope of business,so the restructuring and backdoor listing begin to appear.Backdoor listing is an important way for enterprises to access the capital market.Nowadays,the listing procedure is complex.Backdoor listing is a faster and more effective means of listing.Backdoor listing can expand the development of enterprises,but it also brings great risks to enterprises.In the transaction,the most critical issue is how to evaluate the profitability of the subject matter in a certain period.Such uncertain matters will bring risks,and the two sides of the transaction often have differences on how to price.Because the understanding of the underlying assets is different between the two parties,at this time it will cause different information to be transmitted,and it is not fair for the two parties to deal,so how to maintain the equity of asset transactions in the process of subsequent transactions has become the focus of attention.The emergence of performance commitment system has solved this problem to a certain extent,but although performance commitment has the benefit of ensuring fair transaction,it is also accompanied by the crisis that enterprises can not complete.The first task of a company making performance commitment is how to accomplish its performance,and to be able to accomplish it is the best result.But if the performance can not reach the target,the company will use some means to avoid compensation.So it is particularly necessary to study the content of earnings management driven by performance commitment,which also provides some reference for the healthy use of performance commitment.In this paper,I select the Visual China as a case,which is listed by backdoor in 2014 and signed performance commitment.This paper mainly studies the content of earnings management in Visual China during performance commitment period.On the basis of the previous relevant theories,this paper makes an in-depth analysis of the earnings management in order to complete its performance,and finally draws relevant conclusions and gives some suggestions.The case is introduced at the beginning of the paper,the Jones model and all accrued profit model are used to test whether visual China conducts earnings management or not.After obtaining the positive answer,the motivation and means ofusing earnings management in visual China are analyzed in detail.Finally,it is found that visual China increases its earnings by increasing its expenses to its parent company,increasing its income through accounts receivable and utilizing the government,continue expand raise funds to carry out revenue.The final conclusion is that although earnings management makes visual China profitable in the short term during the commitment period,in view of the major shareholder's series of reductions and cash flow,it has an impact on the development of the enterprise itself.In the latter part of the case study,some suggestions on performance commitment and earnings management are put forward.It is hoped that enterprises can improve the information disclosure system,strengthen the management of performance commitment system and strengthen supervision.It also provides a reference for other enterprises to make better use of performance commitment in the case of asset restructuring and backdoor listing.