Research On Earnings Management Methods Of The Company Suffering Loss Again After Cancelling Special Treatment

Special-treatment mechanism in China's stock market has been set up for more than twenty years.The regulation rules are to be more and more rigorous according to market reaction,in response to which the supervised listed companies have to change their strategies as well.In this game,we could tell whether the upgraded rules are effective and how investors can make the best of the rules to make decisions.This thesis has discussed about a Chinese listed company Xinjiang Korla Pear Co.,Ltd's earnings management behaviors aimed to avoid successive loss after special treatment,otherwise which could lead to delisting,with the help of empirical models and case study.And the research is based on the background of the Specialtreatment rules before revision in 2012.It is found that,when the earnings management is aimed to increase net income numbers to avoid net loss,companies like Korla Pear which suffering great financial crisis and operating problems,prefer to directly use non-recurring gains and losses items;when the earnings management,under more strict regulation,have to be aimed to increase income numbers before non-recurring gains and losses,these companies,correspondingly,switch to more secret ways to manipulate earnings,such as accrual accounting and real operating activities.The conclusions also suggest how the Special-treatment mechanism comes to effect,which has removed the indicator Earnings Before Non-recurring Gains and Losses in 2012.The modified ST mechanism seems to ease the way for companies inflating income numbers,which then make it easier to cancel Special Treatment.However,earnings management which could be easily recognized merely by financial statements actually reduce the difficulty for investors to distinguish the real earning quality of listed companies.This research mainly contributes in two ways.For one thing,it reveals the behavioral logic and purposes of financially difficult companies in specific stages from operating to empty shell stocks,which could help investors appraise,identify and make investing decisions as early stage.For another,the conclusions also demonstrate how the modified rules work,so as to provide views from more standpoints in supervision and rule-improvement work.There are clearly still shortcomings in case study part in data mining and analysis of industrial and regional data,and the connecting interpretation between empirical data and case is not strong enough,which are supposed to be rectified with more efforts.