Research On Earnings Management Behavior Of Getein Biotech Under The Major Public Emergencies

At the beginning of 2020,the sudden outbreak of COVID-19 has brought a huge impact to China and even the whole world,affecting social,economic,health and other levels,and becoming a major public emergency of common global concern.Affected by this,some enterprises have adopted accounting treatments such as large-scale provision for goodwill impairment and bad debt provision to adjust profits to their enterprises,or broaden credit policies to significantly increase accounts receivable,reduced discretionary expenses,etc.,to change the real transaction decisions of enterprises,thereby manipulating surpluses.However,both the above accrued earnings management and true earnings management can exacerbate the distortion of accounting information.Therefore,how do enterprises use earnings management to respond to major public emergencies,and what is the mechanism? It is worth paying attention to.The outbreak of COVID-19 has brought unprecedented development opportunities for the In Vitro Diagnostic industry.This paper takes the COVID-19 of major public emergencies as an example,selects the leading enterprise of the In Vitro Diagnostic industry as the research object,and discusses whether and how the major public emergencies affect the earnings management behavior of enterprises based on its financial statements and other relevant data from 2016 to 2021.The specific contents are as follows: First of all,literature review and review are conducted on earnings management and its relationship with major public emergencies as well as its internal mechanism,and relevant concepts and theories are summarized to lay a theoretical foundation for the study of this paper.Secondly,the main impact of COVID-19 is analyzed from two perspectives of industry and enterprises,and the factual characteristics of the different accounting treatment adopted before and after COVID-19 laid a realistic foundation for the research in the following chapters.Thirdly,this paper uses the modified Jones model and Roychowdury model to calculate the level of accrued earnings management and real earnings management respectively,and discusses the mechanism of action.Finally,the paper analyzes the earnings management behavior of getein biotech under major public emergencies from two aspects of the motivation and means of earnings management.Based on the above research content,it is found that earnings management is the way to respond to major public emergencies of getein biotech.Since the outbreak of COVID-19 could not be predicted in advance,there is a difference between the behavioral characteristics of earnings confirmed in advance in previous earnings management studies,the company implemented both accrued and real earnings management in the current period in the initial year of the outbreak,and the degree of earnings management was higher than before the epidemic,indicating that COVID-19 promoted the earnings management behavior of the company.However,no earnings management behavior was implemented in 2021,which indicates that the company tends to avoid earnings management as the impact of the epidemic gradually weakens.The analysis of the mechanism of action shows that COVID-19 has aggravated the information asymmetry,and objectively provided a more hidden environment for the management to manipulate profits.In addition,COVID-19 has triggered a series of uncertainties including the macro environment,financial market and economic operation,which has led to significant changes in the internal and external environment of enterprises,increased operational uncertainty,and led to a decline in the profitability of getein biotech and the impact of business performance,all these factors have strengthened the motivation of earnings management.Meanwhile,under this circumstance,it makes it harder for managers to stabilize the salary and the increase company’s market value.Further,by analyzing the motivation and means of earnings management behavior of getein biotech,it is concluded that the company implemented earnings management by means of expanding credit policies,capitalizing R&D investment and reducing the annual depreciation rate of assets based on the motivations of increasing market value,stabilizing the salary and mitigating the adverse effect of COVID-19.Finally,the paper puts forward the following suggestions:(1)Regulators should standardize the disclosure of specific information related to major public emergencies,reduce information asymmetry,and compress the space of earnings management so as to improve the quality of accounting information;(2)Improve the early warning mechanism construction of key areas of audit with the help of auditors,move the supervision threshold forward,and pay greater attention to key areas of major public emergencies;(3)Promote the establishment of the valuation system with Chinese characteristics,guide investors to pay attention to long-term sustainable development,and strengthen the value orientation of long-term and high-quality development of listed companies;(4)Enterprises should strengthen the construction of internal control system,improve the risk management mechanism under major public emergencies,and warn the management not to trample on the "red line".