A Study On The Earning Management Of State-owned Enterprises And Private Enterprises In China

Since China’s capital market does not develop fully where relevant laws and regulations are imperfect,it is a prevalent practice for managers to apply earning management as a means for specific goals in corporate governance.The accounting standards for business enterprises was reformed in 2006 and the law on corporate income tax was also amended in the following year.The new standards and law further consummated China’s accounting and tax revenue systems,formulating the accounting practice of the enterprises while leaving a legitimate elastic space for the enterprise to manipulate profit.Thus more and more managers take advantage of the book-tax difference to carry out low-cost and high-profit earning management.This is the reason why adopting index of book-tax difference to identify earning management has become a new direction in the study of earning management practice.Besides,the present economic system in China is a special pattern with the public sector remaining dominant and diverse sectors of the economy developing side by side,contributing to the great divergences in the structure and characteristics of the capital market between China and major western countries.By 2016,the state-owned enterprises had accounted for 60%of all the A-share companies listed in Shanghai and Shenzhen Stock Exchanges in China.The divergences in stock right structure,capital source,management style and operation purpose between the state-owned enterprises and private companies will lead to different goals and methods in earnings management by the two kinds of companies,making it hard to apply the existing research results from abroad directly in the domestic capital market.This thesis combines theoretical and empirical studies,making a classified research on the earning management of China’s listed state-owned enterprises and private companies from the perspective of book-tax difference.By summing up the current development of related researches both at home and abroad,the study takes the data from the annual reports of listed A-share companies that meet the requirements in Shanghai and Shenzhen Stock Exchanges from 2008-2016 as a sample,and put forward some hypothesis of relevant researches combined with theory.By using the results from the regression analysis based on the fixed-effect panel model,the thesis discusses and analyzes the correlation between discretionary book-tax difference and discretionary accruals,and the differences in earning management between China’s listed state-owned enterprises and private companies.The study shows that the discretionary book-tax difference of China’s listed companies has a significant positive correlation with discretionary accruals,and the book-tax difference is an effective index testing the earning management of China’s listed companies by which we can identify whether a listed company carries out the earning management.Besides,China’s listed companies carry out frequent earning management,no matter they are private companies or state-owned enterprises.However,the private companies tend to adopt positive earning management more than state-owned ones,and generally they enjoy a higher level of earning management than state-owned enterprises.Lastly,the thesis put forward suggestions in areas such as the amendment of laws and regulations and improving market supervision based on its theoretical research and empirical analysis.