Research On Earnings Management Mode And Degree Based On Positive And Negative Directions Model

With the development of the global economic system and the growth of the capitalmarket, the phenomenon of earnings management has already been the focus whichattracts researches all over the world. The definition of earnings management is that themanager of corporate uses accrual-based manipulation and real activities manipulation tochange the financial report, in order to make stakeholders understand the value of the firmin the way that the manager hopes. So far researchers have already proved that manycorporates practiced earnings management for different purposes. We can say withoutdoubt that earnings management has already been a method frequently used to avoid orcater to administration by many firms. Subsequently, earnings management not onlyinfluences the decision of the accounting principle directly but also is a problem which isclosely related to the protection of the investors.This paper puts forward a stochastic variable stands for the value which the managercreated, establishes a model that comprehensively considers positive earningsmanagement and negative earnings management and study how the stockholders orinvestors supervise and encourage the managers to maximize their untilities. Meanwhile,we study how the manager uses accrual-based manipulation and real activitiesmanipulation to maximize his untility. Firstly we solve the result of the model. Then westudy the relationship between accrual-based manipulation and real activitiesmanipulation. Moreover, we study how the change of tax rate influences the relationshipamong accrual-based manipulation, real activities manipulation, investor administration,contract and manager characteristic and prove four propositions.This paper enriches the theory of earnings management and helps regulators andinvestors understand the phenomenon of earnings management more comprehensively andreasoningly.