An Empirical Study Of Asset Write-down Incentives And Effects

The coexistence of state-owned and privately-owned listed companies is one of the distinctive characteristics of Chinese market economy at this stage.The State Council announced “Opinions on the Development of Mixed Ownership Economy by State-owned Enterprises” on September 24,2015,and therefore aroused again an extensive discussion about the influence of corporate nature on companies' operation and management.And this paper intends to figure out the relationship between corporate nature and accounting behaviors,selecting asset write-down as the entry point.This paper studies the motivations of asset impairment and its follow-up effects to show whether there is unreasonable accounting manipulation.At the same time,this paper introduces the differences of assets write-down behaviors between state-owned and privately-owned listed companies,so as to illustrate the potential influences of corporate nature on companies' accounting behaviors.This paper draws main conclusions as follows: 1,Economic factors and earning management are the major motivations for listed companies to report asset impairments.Factors including changes of companies' operation conditions,earning smoothing intentions and changes of CEOs can exert a significant impact on the asset write-down decisions of listed companies.2,Motivations for asset write-downs influence state-owned listed companies and private listed companies differently.The asset write-down decisions of state-owned listed companies are affected by the motivations for earning smoothing to an extent which is significantly greater than that of privately-owned listed companies.3,Changes of companies' operating performance after the report of asset write-downs between state-owned and private listed companies are also different.The change of operating performance of state-owned listed companies is negatively correlated with asset impairments caused by economic factors,but positively correlated with asset impairments caused by earnings management.As for privately-owned listed companies,however,the change of operating performance is positively correlated with asset impairments caused by earnings management,but has no significant correlation with the impairment loss of assets caused by economic factors.