Behavioral And Economic Consequences Of Lanfeng Biochemical Earnings Management Compound Performance Attribution

With the revision of the "Securities Law" and "Administrative Measures for Information Disclosure of Listed Companies",the state has stepped up its supervision over information disclosure and earnings management.However,it is still common for listed companies to use earnings management to manipulate performance because the dividends of listing are far greater than the cost of penalties.Although earnings management can improve the performance of the statement,its performance changes need to be explained externally,that is,performance attribution.Performance attribution generally has a self-interested tendency,that is,the management will attribute good performance to the improvement of internal management,and attribute poor performance to the bad external environment,so as to use the method of impression management to beautify the company’s image.Earnings management and performance attribution often occur at the same time.Listed companies first use earnings management to adjust profits,and then use performance attribution to attribute changes in performance to other matters that are beneficial to the company,so as to cover up their earnings management behavior.They are interdependent and mutually reinforcing.Because of this,the compound performance attribution behavior of earnings management not only numbs the enterprise itself,but also influences investors to make correct decisions.Therefore,in-depth research on the behavior and economic consequences of earnings management compound performance attribution is of great significance for promoting the healthy development of my country’s capital market.This paper adopts the case study method and selects Lanfeng Biochemical,which uses earnings management and performance attribution to protect the shell in the agrochemical industry,as the research object.Lanfeng Biochemical was named *ST after experiencing huge losses in succession from 2018 to 2019,and then used earnings management to turn the corner in 2020.The performance attribution during this period has obvious tendency of self-interest,which is a typical case of using earnings management and performance attribution to protect the shell.Based on the theoretical basis and related research of earnings management and performance attribution,this paper first analyzes the motivation and behavior of Lanfeng Biochemical’s earnings management,and then analyzes the rationality of its performance attribution.Combined with the analysis results of Lanfeng Biochemical’s earnings management and the rationality of performance attribution,the clues of its compound manipulation performance are found,and then the compound relationship between the two is analyzed.Finally,the economic consequences of Lanfeng Biochemical’s use of earnings management and performance attribution to manipulate performance are analyzed from the perspective of market and finance.This paper draws the following conclusions:(1)Lanfeng Biochemical uses earnings management compound performance attribution to manipulate performance.In 2018-2019,the company used the performance attribution of "poor external environment" to weaken the impact of asset impairment losses on performance.In 2020,the company used the performance attribution of "adjusting the strategy and returning to the main business" to cover up the abnormal disposal of equity surplus management behavior.The company used the performance attribution of "improving the level of internal control" to cover up the earnings management behavior of transactions with related parties.(2)The negative economic consequences of Lanfeng Biochemical’s earnings management compound performance attribution are greater than the positive ones.When the company conducts negative earnings management and self-interested performance attribution,the stock price and operating conditions become very poor,which seriously damages the interests of investors and the company’s image.When the company conducts positive earnings management and self-interested performance attribution,although the stock price and operating conditions can indeed be improved in the short term,in the long run,the stock price is on a downward trend,and the operating conditions have not been truly improved.It can be seen that such an improvement is not sustainable and will harm the interests of investors.Based on this,this paper puts forward the following suggestions:(1)Improve accounting-related standards and systems,and reduce the behavior of companies using policy loopholes for earnings management.(2)Improve performance attribution language information disclosure,reduce information asymmetry,and allow investors to make reasonable decisions.(3)Improve the delisting risk warning system,amend quantitative indicators and add non-quantitative indicators.(4)Strengthen the company’s internal governance and external supervision and management.