Empirical Study Of Earnings Management Of IPO Firms In China

Earnings Management is becoming a forefront research topic in the international economics and in the accounting academy since 1980s;furtheermore,it is a worldwide complicated problem.Earnings Management in Chinese listed companies is so prevalent that is has brought a negative impact on the normal functioning of the market economy.This paper aims at providing direction for investors and policy recommendations for government supervision departments by means of positive comparison studies on Earnings Management among industries.Based on the basic theory of Earnings Management,EM motives and EM means in Chinese listed companies,the paper takes use of a New Accruals Models to study IPO firms data of 14 industries from 2000 to 2007.The paper has verified 3 significant conclusions:(1)Universality of Earnings Management:Earnings Management is highly universal in 14 industries in China.(2)Direction of earnings management:14 sectors are taking on a positive Earnings Management,which means that all of IPO firms tend to make more earnings.(3)Degree of Earnings Management: IPO firms do significantly earnings management in IPO next year and before.The magnitude of earnings management is an average of 6%of the beginning total assets in IPO year and before.This means IPO firms in China not only take on Earnings Management but also the extent of Earnings Management is quite high.Finally the study puts forward 3 policy recommendations:making better governance structure, improving traditional accounting model,improving disclosure system of financial information.