Impact Of Earnings Management Of Special Treated Companies On These Companies’ Market Performance And Long-term Accounting Performance

Since the implementation of the Special Treated system, there are many companies that have not been delisted but remaining special treated more than3years. Among these companies, there are45companies that have been special treated twice, which shows many companies can not improve performance significantly after removing the title of ST. While the phenomenon that ST companies improve their short-term performance by earnings management is very popular.Based on the unexpected accruals model, this paper studies earnings management of the special treated companies between2001and2009which are removed the label of ST in3years and before2010. And the paper selects the sample group of ST companies which are removed the label of ST only by earnings management. The rest ST companies are matched group. Mainly using event study and accounting study, this paper investigates these two groups. It shows that earnings management can remove the label of ST with a significant excess return. However, the short-term action results in poor long-term market performance. Compared with the matched group, the special treated companies of the sample group also enjoy a worse long-term accounting performance. It shows that the short-sighted actions will harm the long-term performance of companies and the benefits of shareholders as well as investors. Thus, this paper suggests that the short-sighted actions like earnings management of ST companies should be given a strong supervision.