A Research On Earnings Management Of Chinese Listed Companies With Reverse Change In Price-Earnings Ratio

Accounting information accounts for a large proportion of the information which disclosed by the listed companies. Earnings information is concerned mostly by investors in accounting information. Investors require true and fair earnings information which disclosed by the listed companies. Stakeholders make proper evaluations on company using earnings indexes as the main indicators as well as the most important indicators that the securities regulatory department used to supervise the listed companies. Earnings management is linked with the authenticity of financial accounting information. The financial and accounting information which disclosed by the listed companies must be true and reflects well and truly of the profitability of enterprises, the financial situation and the changes of the listed companies. The Chinese stock market is not a product which the commercial economic developed naturally to a certain stage, but an external transactions system that the government created to promote the reform of state-owned enterprises. Therefore, the financial frauds have never stopped since the stock market was founded. Earnings management has become a prevalent behavior of the listed companies. Based on this background, this paper gives a study on the earnings management of listed companies from the reverse change in Price-Earnings (P/E) ratio.Firstly, this paper mainly introduces environment, the literature survey and the content of the research, analyses the theoretical basis which engenders the earnings management and the relation between P/E ratio and the values of company, the relation between the earnings management and the reverse change in P/E ratio.This paper applies the P/E ratio which the securities market used to evaluate the listed companies. For the evidence of the research, this paper puts forward the assumption of relation between earnings management and the reverse change in P/E ratio from a new visual angle, studies the earnings management taking use of four models, for example Industry-Scale Total Accruals Model, Extended-Jones Model etc. The empirical results find some evidence that the Chinese listed companies with reverse change in P/E Ratio have taken earnings management. This paper also analyzes the fore-and-aft behaviors of earnings and rising ability about different Chinese listed companies with reverse change in P/E Ratio. Through analyzing the net profit and operating cash flow variation trend of sample and control sample companies, this paper finds that the performance of the company with 3A after the reverse change in P/E ratio...