An Empirical Research On Real Earnings Management In Chinese Financial Enterprise

Earnings management has always been one of the hot topic in the accountingprofession. Earnings management can be classified as accruals earnings managementand real earnings management. Accruals earnings management involves within thechoice of accounting policy which try to obscure true economic performance. Realearnings management is an action that through change the time or structures anoperation to influence the profits. Earnings management is related to accountinginformation quality, investor protection and accounting standards. Since the lastcentury in China’s capital market, almost all the literatures of earnings managementare about accruals earnings management. The research about real earningsmanagement is not enough.As the core of modern economy, financial enterprises have special itself, whichis different with common enterprise. So in the predecessors’ research of earningsmanagement, financial firms have always been excluded. But financial enterpriseshave an very important role in the national economic development. The newaccounting standards issued in2006, which make a lot of new regulations on financialassets, would also be a new challenge to financial enterprises.This thesis will use empirical method to research the real earnings managementof financial enterprises in China after the new accounting standards. Firstly, make areview of the theory and literature related real earnings management. Then reach thespecial motivation and tools as the available for sale financial assets of financialenterprises with the analysis of their characteristics. On that basis, this paper raisesseven assumptions and checks them by Frequency distribution method, Descriptivestatistics and Regression analysisThrough empirical research, this thesis mainly draws the following conclusions:The overall earnings management for avoiding losses and SEO is exist in financialenterprises of China. The motivation of avoiding surplus to reduce is not striking infinancial enterprises of China. Losses of financial enterprises would increase reportedearnings by sailing the available for sale financial asset in order to avoid losses.Rising in financial enterprises would smooth the surplus by sailing available for salefinancial assets to reduce the surplus. But the decline in financial enterprises would donothing for avoid the decline. The provisions about the other comprehensive incomethat issued by ministry of finance in2009didn’t make use of available for salefinancial asset disposal for real earnings management behavior has obvious inhibitoryeffect.Summing up the above conclusion, after the introduction of the new accountingstandards, the overall earnings management is exist in financial enterprises of China.And its main motivation is to avoid losses, SEO and so on. The implementation ofnew standards limiting the manipulation space of the accrual earnings management such as loan loss preparation and derivative financial instruments. But it did provideavailable for real earnings management control method as sale financial assetsdisposal. And as the motivation of the overall earnings management, the mainmotivation of real earnings management within available for sale financial assetdisposal among China’s financial enterprises is to avoid loss and surplus increases.Both overall earnings management, and real earnings management, the motivation ofavoiding surplus to reduce is not striking. The end of the thesis points out the shortageand improvement of a study place and puts forward some related suggestions to thefinancial regulators, standard-setters and financial internal management.