Research On Real Earnings Management Behavior During Stock Repurchase In Home Appliance Industry

With the improvement of people’s living standards,the purchase of household appliances has gradually increased,and there are more and more companies in the household appliance industry.Jiuyang,which specializes in small household appliances,Gree,which is famous for office appliances,Midea,which has an industrial chain all over the world,and so on.People are no longer saving money to buy a washing machine as before.Now they can shop around and choose the household appliances with the highest cost performance.This is a good thing for consumers,However,for home appliance enterprises,the competitive pressure is high,the market tends to be saturated,and it is difficult for the share price to rise again,so major enterprises are looking for ways to increase the share price.Stock repurchase was first widely used in the 2008 world financial crisis.Many domestic enterprises reduced investment and began to stabilize their stock prices through repurchase.In 2015,the China Securities Regulatory Commission and other four ministries jointly issued relevant documents on stock repurchase,which clearly pointed out that it was necessary to support and promote listed companies to implement capital operations including stock repurchase.A-share companies began to buy back their shares one after another.With the continuous release of policies to encourage share buyback in 2018 and 2019,and the increasing pressure of industry competition,all major household appliance enterprises began to buy back their shares.The purpose of stock repurchase by enterprises has also changed from stabilizing the stock price to transmitting good signals,so as to improve the stock price and attract more investors.This is a favorable behavior in itself.However,through the analysis of the financial statements of enterprises,it is found that some enterprises have indicated abnormal conditions before and after the stock repurchase,and their short-term solvency and development ability have been damaged after the stock repurchase.The stock price has not risen but fallen,All kinds of anomalies show that the company has real earnings management behavior before and after the share repurchase,which deviates from the normal business behavior of the enterprise,which is a great harm to investors and a disturbing behavior to the market.Starting from the abnormal fluctuation of stock price after Midea Group’s share repurchase,this paper selects Midea Group as the research object.Based on the signal transmission theory,financial leverage theory,principal-agent theory and information asymmetry theory,it briefly introduces the development of home appliance industry and the urgency of share repurchase,the basic situation of Midea Group,and the process and results of Midea’s share repurchase.Through the analysis of the reasons why the purpose of share repurchase was not achieved,it was subjectively concluded that it was due to the existence of real earnings management behavior,and then objectively identified it.By using the Roychowdhury model and the financial statement level that are unique to real earnings management behavior,it was concluded that Midea Group did have real earnings management behavior before and after share repurchase,which led to the failure of the original purpose of share repurchase.When enterprises use their own funds,We should pay attention to the proportion between the total amount and the current assets of the enterprise.If the proportion is too high,it will have a certain impact on the short-term solvency and stability of the enterprise;At the same time,we should be alert to connected transactions.There are many hidden dangers in connected transactions,which will damage the growth ability of enterprises;The purpose of stock repurchase by most enterprises is equity incentive,so it is necessary to restrict the executives who get equity and sell the stocks at a high price after equity incentive,which is equivalent to enriching the executives’ own wallets with investors’ money,which is a great harm to investors’ trust and will cause the stock price to fall.Based on this,the following suggestions and enlightenment are made:for regulators,they should strengthen the special audit of enterprises,introduce measurement indicators of earnings management into the financial statements of enterprises,and restrict the real earnings management behavior before and after stock repurchase;For investors,they should pay attention to non recurring profit and loss items,related party transactions items and the cash flow status of enterprises,be alert to the abnormal behavior of enterprises before share repurchase,and safeguard their own interests.It is expected that this paper can provide some reference for the avoidance of real earnings management behavior before and after share repurchase in the home appliance industry,and promote the better development of the home appliance industry.