The Study Of Earnings Management By Extraordinary Items In Listed Companies Under Special Treatment

Earnings information is concerned closely by investors, creditor and other stakeholders. Because of the information asymmetry, there are large amounts of earnings management behavior in list companies. As the most important information that appraises the performance of list companies, Extraordinary items is an important means to adjust earnings. As we all know, recurrent earning is the core income of a company, investors can predict the company' future earning by its continuity while extraordinary items can't do since it is a kind of accidental item. If directors handled extraordinary items, stock prices couldn't substantially reflect the real earning of the list company.Under such background, the paper studies earnings management by handling extraordinary items of listed companies under special treatment(2002-2005). Firstly, the paper gives a theoretical recognition of what is extraordinary items and what kind of characteristics there is, then introduces the motives of earnings management by handling extraordinary items. Secondly, we adopt empirical research analyzing the phenomenon of earnings management by regulating the extraordinary items in China's list companies under special treatment. We researched the earnings management by descriptive statistics, distributing analysis, correlations and regression model. The result suggests that listed companies under special treatment decreases earnings by handling extraordinary items before the year of special treatment, and increases earnings in the year of special management, while increases earnings before the year of free from special treatment. The last part puts forward a series of suggestion to improve the quality of earning.