| When the investors have a basic analysis on a listed firm, the earning management is can't be shied away. In order to meet the qualification of rights issue, listed firms have the incentive to conduct earnings management. At the same time, the related party transactions become a way of listed firms conduct earning managements. The phenomena and incentives of listed companies making use of the connected transactions to manage earnings are studied in this paper.First, based on the review of correlated literature, the author clarifies the definitions of connected transactions and earnings management. Moreover, the types, measures and trend of the connected transactions are analyzed from the situation of our listed companies. Second. 1050 listed companies with the standard auditing opinions by CPA are chosen as the research sample from Shanghai and Shenzhen stock mark, which disclose the important connected transactions in financial statements in 2006. Afterwards, the characters of phenomenon of earnings management in China's listed company are studied by descriptive statistics and nonparametric tests. Then this paper draws conclusions as follows: There are the phenomena of earnings management in the research sample. There are some certain relations between the connected transactions to manage earnings that listed companies making use of and the property ratio of debt to net worth. but the relations are indefinite. There are no relations between the connected transactions to manage earnings that listed companies making use of and the phenomena of higher managements change. Listed companies which had the share matching to be listed in 2006, ST listed companies, Listed companies which reversing losses, and listed companies which have first major stockholder .the connection transaction degree are higher. Finally, the author put forward some measures of how to improve the listed companies make earning managements by he related party transactions. |
