A Study Of Chinese Listed Company's Earning Management

The South Sea Event, the first case of the financial frauds in listed companies, occurred in 1720. From then on, the earnings managements (EM) done by list companies have been not found faded away. Especially in recent years, profit manipulations with the bigger damage have taken place, including overseas cases, namely Enron, and the domestic cases, such as GUANGXIA, LANTIAN and so on. As the securities market has been developed in our country over decades, it plays a principle role in the allocation of resources. However, resulted by the unqualified financial reporting, the rational investors have not enough confidence in Chinese securities market, which hampers the further development of the market. Now, it is eager to find the solutions on how to identify and take precautions against EM for its complexity and stealth. Author regards it is meaningful for China to improve the quality of current accounting information based on the western countries'experiences in the administration of EM.This paper falls into five parts: Chapter 1&2 deal with the definition of EM and its basic characteristics, analyze the subjective and objective reasons; Chapter 3, reviews the study on EM from overseas and domestic; Chap 4, states characteristics and objectives of Chinese listed companies'EM, and also gives detailed analysis of the cases of Chinese listed companies'EM; Chap 5, discusses six means to identify EM done by Chinese listed Companies. Lastly, considering USA experience, it systematically puts forward some methods of the administration of EM from 5 aspects after it analyzes positive and negative influences of EM.The purpose of this paper is, through giving analysis on EM's objective and methodology of Chinese listed companies, to present author's suggestions for related organizations about a set of systematical administration of EM based on USA experiences. In author's opinion, this paper is trying to make innovations or bring forth-new ideas in three dimensions: First is definition about EM given by author; Secondly, it makes it clear that EM brings more disadvantages than advantages; Thirdly, learning from Sarbanes-Oxley-Act, it brings forth advices about EM in viewof internal management structure and judicature intervention; Lastly, it brings forward the amend suggestions for New Accounting Standards issued in 2006 in view of EM, and it also gives suggestions to take precautions for the imaginable EM means in all circulating period. For knowledge is limited to author now know and understand, several issues discussed require additional work: First, author needs to investigate more deep on how to strengthen legislation and industry supervision to control and take precautions against EM; Secondly, additional countermeasures should be provided especially for variation rules of EM means in China's process of marketization and systematization; Lastly, author needs to attest to more important thing for precautions of Listed Companies'EM should be raise the awareness of social morality and public trust.