An Analysis On Earnings Management Of Listed Companies With Meager Profits

With the rapid development of China’s securities market, listed companies which play an important role on national economy promote economic prosperity and stability. Accounting earnings is an important form of the company’s financial condition and operating results. Earnings management which is behavior that if there is a listed company through make use of manipulation of accruals、investment income、operating income、other profits and cost of the project to maximize operators’own interests or value of company will seriously affect decision of accounting information users. Unfair accounting information would mislead investors to make bad investment decisions, affecting the rational allocation of capital which is not conducive to make a fair and reasonable capital market. Companies whose return on net assets are between0%～1%and net profit greater than zero are defined as listed companies with meager profits. Some of them are often considered to have a strong motivation for earnings management, their operating results is just more than break-even point and slightly better than the loss of listed companies to escape sanction such as regulation on suspending and ending entering the security market for loss listed companies. How to ensure accounting information more reliable is a primary problem to make operation of listed companies with meager profits in a proper order. Therefore, researching the existence and means of earnings management is particularly necessary.Combined with China’s special political and economic environment and salient features of this kind companies, it analysis main motivation and other factors of earnings management. Earnings management is decided by various factors, there is preferences for methods of earnings management. For its preferred way, it analysis on four areas including support of government, related transaction, debt restructuring,investment income deeply. It selected financial data from the number of597listed companies with meager profits which is from manufacturing sector as study sample. It refers to Information from2008to2010three consecutive years. Discretional accruals are calculated by the modified Jones model, testing the existence of earnings management behavior. Sample data is analysised by using multiple linear regression analysis and descriptive statistics of spss software to verify the hypothesis. According to method of earnings management, paper discusses further improve suppression of conduct system in five aspects: improve the effectiveness of government decision-making and supervision, perfect delisting system of stock market, increase the penalties for violations, establish an effective early warning mechanism and make accounting treatment rules refining. It want to enhance ability to identify financial information of information users, help stakeholders to make right judgments and decisions, explore and try to make perfect accounting standards of companies. Information which is from further regulate securities market will help the stock market become more rational and mature, promoting the China’s economy healthy and rapidly.