Earnings Management Of Listed Companies Based On Self-interested Performance Attributions

As China’s capital market system is still not perfect,there are a large number of earnings management behaviors in China’s listed companies,and there is widespread self-interest in the performance attributing part of the annual report.All these will lead to a decline in the quality of financial information and non-financial information disclosed by listed companies,thus affecting the long-term development of the company,and it is difficult for shareholders and investors to find investment traps.It also hinders the supervision of listed companies by government regulators.The new "Securities Law" implemented in 2020 has significantly increased the cost of illegal operations of listed companies,and also shows that China’s regulatory authorities attach importance to the illegal operations of listed companies in the securities market.Therefore,it is necessary to strengthen the cognition of earnings management and self-serving performance attribution behavior in order to identify these problems in a timely and effective manner.The purpose of this paper is to discuss how listed companies adjust their profits through earnings management and use self-serving performance attribution to cover up earnings management.In order to verify this conclusion,this paper takes Company H as an example and uses the revised Jones model,Roychowdhury model and performance attribution location recognition model to better identify the company’s earnings management behavior and self-interested performance attribution behavior.According to the research and analysis of this paper,it is found that H company has the motive of market protection and compensation in earnings management,and the motive of obtaining legitimacy and making up the expectation gap by using self-serving performance attribution to hide earnings management.Company H has taken a series of measures to manage its surplus.For example,Company H aggravated its losses in 2017,2018 and 2020 by making provision for impairment losses and bad debt losses,etc.In 2019 and 2021,it turned around losses through capital increase agreements with related parties and equity transfer.At the same time,in order to cover up the earnings management behavior,H company also adopted the means of protective impression management and acquired impression management,so as to achieve the goal of turning losses into profits.It can be found through the study of this paper that although H Company’s earnings management behavior and self-serving performance attribution behavior can temporarily improve its profit,they cannot really improve its long-term development,but may lead to the decline of its profitability and growth ability.Therefore,China’s capital market needs to improve the corresponding laws and regulations to deal with this phenomenon.First,non-recurring profit and loss can be listed in the consolidated income statement as regular items disclosed in the annual report;Second,improve the stock delisting system,not only pay attention to the company’s net profit,but also pay enough attention to other financial indicators such as the company’s net profit after withholding,so as to avoid listed companies using earnings management behavior to turn losses into profits as much as possible.Third,strengthen the supervision of information disclosure of listed companies,so that investors can rationally identify the actual situation of the company’s operation.Fourth,regulators and audit institutions must also strengthen the supervision of non-financial information,and take various measures to strengthen the supervision and prevention of listed companies’ behavior of hiding earnings management,so as to ensure the sustainable development of enterprises and the legitimate rights and interests of all stakeholders.