Earnings Management Research Of Backdoor Companies Before And After Listing

Listed companies are intended to implement the earnings management for the purpose of financing and raising the share price during the period of go public.The earnings management includes two methods: accrual-based earnings management and real activity earnings management.As an important reflect of information quality,enterprises implement different earnings management means it would have different effect on the future performance of enterprises before and after go public.Practice shows that it is difficult for regulators and investors to identify the earnings management behavior of before and after the shell.Compared with the direct listed companies,investors and market take a dim view of the reverse merges’ future performance.Therefore,based on the perspective of earnings management,it is of great theoretical and practical significance to study the selection of earnings management mode before and after the listing of backdoor listed companies and the difference of earnings quality compared with IPO enterprises.We first examine the difference about accrued-based earnings management and real activity earnings management of backdoor listed companies total of 6 years before and after they go public.Based on the company’s demand for fixed profit and recovery capital,the accrued-based earnings management is occurred in the first year and the year before the listing and then gradually dissipated.After listing,enterprises tend to adopt the real activity earnings management behavior until the third year after listing,the real activity earnings management level declines significantly.Compared with accrued-based earnings management,the real activity earnings management has a more negative impact on the future performance of enterprises.From earnings quality perspective,we take a research on the backdoor companies’ difference about earning quality performance before and after go public.Meanwhile,we try to find the earning quality difference between the IPO companies and the back door companies.we have found not only the accrual-based earning management of the backdoor listed companies in the first year after go public is higher than the accrualbased earning management of the backdoor listed companies in the previous year,but also the real earning management of the backdoor listed companies in the first year is higher than the real earning management of the backdoor listed companies in the previous year.Furthermore,we expanding sample estimate into the backdoor listed companies before and after go public for six years.The further studies show that the accrual-based earning management of the backdoor listed companies in the three years after go public is no more significance compared with the accrual-based earning management of the backdoor listed companies in the three years before go public,while the real earning management of the backdoor listed companies in the three years after go public is no more significance.We can draw a conclusion that the backdoor companies had a brief performance improvement after go public and then the level of earning quality of backdoor listed companies after go public is lower than the level of earning quality of backdoor listed companies before go public.In addition,compared with IPO companies,the backdoor listing of the company’s earnings quality is lower,IPO company earnings quality is closer to the true level of enterprise.It can be show that two listed ways of real activity earnings management difference is mainly manifested in the three year after listed while two listed ways of accrual-based earning management difference is mainly manifested in the three year before listed.