Research On The Relationship Between Ownership Nature?Earnings Management And MD&A Readability

Enterprises intentionally alter linguistic or non-linguistic information in annual report so that investors remain a positive impression on the Enterprises,which is called Impression Management.Foreign researches have been studying the impression management for more than half a century.In the 1980 s,researcher of accounting field began to draw into impression management,and found evidences support that enterprises attempt to adjust their reporting text information or earnings to implement impression management.Annual report is the most crucial source to acquaint investor with facts of companies.It has a great influence on the individual investors whether the information of annual report is accurate or not.As we all know,earnings management has also led to the decline in the quality and effectiveness of information disclosure in recent years.Therefore,the study of the relationship between earnings management and readability of corporate statements will help to enhance the understanding of corporate information disclosure behavior and help to limit the deliberate reduction of accounting information quality.Using 1055 listed companies in Shanghai and Shenzhen A-share market in 2018 as the research sample,this paper study the relationship between earnings management and MD&A readability,and analyzes whether there is any difference between state-owned enterprises and non-state-owned enterprises.Quoting previous studies,this paper chooses two different methods to measure the readability of the MD&A readability to increase the robustness of the study.The conclusions are as follows:(1)Overall,the lower the quality of earnings,the lower the readability of MD&A.(2)For state-owned enterprises,relationship between earnings management and MD&A readability is more significant.This paper believes companies that conduct earnings management tend to control report readability to manage the impression as well.Lower readability and earnings quality will greatly reduce the effectiveness of accounting information.The government should further standardize the forms of annual report,so that the report can be comprehended by users.In addition,investors,especially the third party analysts,should improve their reading ability of annual reports and reduce the possibility of being deluded.