Research On The Reasons Of Real Earnings Management Of Listed Companies In China

Following a series of financial scandals in 2000 in the United States,the behavior that listed companies manipulate accrued earnings management is gradually paid attention to.However,the enforcement of United States "Sarbanes-Oxley Act" in 2002 has limited the listed companies’ manipulating accrued earnings management to some extent.Hence,real earnings management,as a new earning management method,has been accepted and chosen by more and more listed companies.Compared with traditional accrued earnings management,real earnings management via such timing trading activities as manipulation,financing,and(or)equity trading,misleads the market investors,and achieve their purpose of earnings management.Besides,the real earnings management is less constrained by the enterprise accounting flexibility.However,real earnings management also damages the long-term development of the listed companies and the legal interest of the market investors,and especially with the increase of manipulation difficulty to accrued earnings management,the extent of listed companies’ manipulating real earnings management also increase.So,it has important theoretical and practical significance to find out the rooted cause of listed companies’ manipulating real earnings management and look for means to restrict and restrain real earnings management.On the basis of drawing lessons from traditional financial theory,behavior finance theory and referring to existing literature and reference,the paper tests the extent of the Chinese listed companies’ manipulating real earnings management to verify the relationship between real earnings management and accrued earnings management of the Chinese listed companies.And in view of obtaining interest,avoiding external supervision and internal supervision,the paper is to verify the cause for Chinese listed companies to manipulate the real earnings management and put forward related political suggestions according to the empirical conclusions..The results show that:(1)Chinese listed companies generally have real earnings management behavior,there are differences in the degree of real earnings management between different industries,and Chinese listed companies widely use real earnings management instead of accrual earnings management;(2)the reason of Chinese listed companies use real earnings management instead of accrued earnings management is to fundamentally get enough earnings.When the listed companies manipulate real earnings management,they pursuit of earnings and avoid risks(cost),while they avoid the loss and prefer the risks(cost),and the coefficient of relationship in the earnings range is more gentle than the loss range;(3)Chinese listed companies do not manipulate the real earnings management because of escaping external supervision,high quality external auditcan restrain real earnings management as well as the good external system environment do.(4)internal control can restrain real earnings management.Compared with those listed companies that don not volunteer to reveal internal control assessment report,the extent of real earnings management for listed companies that volunteer to reveal internal control assessment report.and the independent director system can restrain real earnings management too.Compared with former research,the innovation for this research lies in:First,existing literature prefer that listed companies use real earnings management instead of accrued earnings management is one factor,but the paper thinks it is just a “surface phenomena”,that is to say the listed companies have some other reasons such as gaining profit,escaping supervision,and such reasons have replaced accrued earnings management,which is the innovation of the research.Then,during research,the paper mainly based on gaining profit,escaping external supervision and internal supervision discusses the substitution possibility of real earnings management instead of accrued earnings management and of which,discussing the risk and profit of real earnings management by prospect theory,explaining the existence of real earnings management by prospect theory are not mentioned in former literature and they are the innovations for this research.Besides,this study verified the profit factor is the most fundamental reason of real earnings management of listed companies in China,which provides new empirical evidence for the conclusion of the study and research on real earnings management.On the one hand,it provides evidence to support and determine the regulatory objectives for the relevant regulatory authorities to develop regulatory policies.On the other hand,the research of real earnings management is more detailed and precisely,and the conclusion of this paper is innovative.