Study On The Consequences Of Real Earnings Management

Listed company’s earnings management behavior has been a hot issue in thecorporate governance and academic research for years, although there are a variety ofmeans to manipulate earnings, they can be roughly divided into the following threecategories: accounting fraud,accrual-based earnings management and real earningsmanagement. The traditional sense of the earnings management refers Accrual-basedEarnings Management, by choosing the accounting policies and accountingestimates,managers of the company manipulate the accrued profit. Although this typeof earnings management means can help managers achieve earnings targets, it’s notessentially change the company’s business strategy. Real earnings management refersto the manipulation of the company’s true operating activities, it impacts the real cashflow. Both means achieve the purpose of earnings management, but the latter one dohas impacted the company’s real operating behavior and alternative means are moresubtle, so it catches more and more attention of the academia.This article selects samples from the A-share listed companies of years2003-2011,and learns from scholars at home and abroad, screens the samples thatuplift the short-term gains through real earnings management means, to conduct astudy of the economic consequences of their behavior, and the impact factors thataffect managers’ real earnings management behavior. This paper is divided into fiveparts: The first part is an introduction, describes the background and significance ofthis study,to collate and summarize the relevant literatures,and describes the researchmethod and content of the framework; the second part introduces the theoretical basisof real earnings management; means and the possible consequences of real earningsmanagement are also discussed in this part, influencing factors are discussed in thethird part of the article,and generates our assumptions; based on the theoreticalanalysis,through empirical research,fourth part proves that real earnings managementdo has economic consequences, and i also analyzed the related factors that likely toaffect the behavior of real earnings management of listed companies; fifth part for the full text of the conclusions and outlook.The main conclusions of this paper are as follows: First, the sample companieshave lower ROA compared to the control samples in the next three years,suggestingthat real earnings management do has economic consequences;Second,analysis offactors that may affect the managers’ real earnings management behavior proves thatthe degree of ownership concentration and real earnings management has a positivecorrelation;governance mechanisms reduce the degree of real earnings managementof listed companies; listed companies incentives mechanism do a little to managers’real earnings management behavior; state holding listed companies--compared tonon-state-owned holding company--has a lower real earnings management degree.