The Empirical Research Of Relationship Between Diversification And Earnings Management

Diversification and earnings management become research hotspot in recent years. However, long-term since, most scholars research diversification and earnings management only in two separate field , and the field of study of the relationship between diversification and earnings management is rare. This paper will be a linkage between the two, we will research the influence of diversification to earnings management, and we want to provide suggestions and decision-making basis to diversification and supervision of management of Chinese listed company.Based on reviewing the relevant literatures and theory, we interpret the definition, summarize the motives of business diversification, and probe into the measures of diversification, we introduce the definition of earnings management, the motive of earnings management behavior and measures of earnings management, and settle the existing study of relationships between diversification and earnings management ; Then according to the information asymmetry theory and principal-agent theory we put forward our hypothesis;Finally we choose three years in 2007-2009 of the listed company as a-shares research data, after appropriate screening as research samples, and we use descriptive statistics, correlation analysis, the common least-square method in empirical analysis to research the relationship between diversification and earnings management, and further we analyze the influence of diversification to different direction of earnings management.The results of the study show that, the 1/3 of the Chinese listed companies implement diversification strategy; In addition, upward earnings management behavior is commonly existing in Chinese listed company; After the study we find that diversification has a positive association with earnings management level, and diversification has a negative association with downward earnings management, and diversification has a positive association with upward earnings management. Our conclusion wants to give some significance to the relevant management of diversified company, the research of diversification and earnings management.