Earnings Management Research In M&A Of Chinese Listed Companies

After more than20years of development, China’s securities market has become mature and made considerable progress. With market capacity growing, transaction approach enriching, regulatory regime increasingly specification, that offers a tract rich soil for the wave of acquisition. Under the background of economic globalization, since2008the global financial crisis, the development trend of Chinese economy has taken a beating inevitable on some level, making lots of listed company operating condition difficult and looking elsewhere. Merger and acquisition (M&A), as one of company’s long-term development and social resources optimized allocation ways, has been used in many substantial corporations to integrate resources effectively, strengthen the core competence, expand market share and reduce business risk. Because of the presence of earnings management motivation, we started to focus on the behavior of acquirers in the process of M&A.Based on conception of M&A and earnings management, the paper introduces related theory and various models about earnings management, the research actuality on the combination of M&A and earnings management at home and abroad. Walking on the predecessors shoulder, the paper puts forward three hypotheses with respect to the behavior of listed company in M&A, after that adopt empirical analysis. The paper selects acquirers issuing A shares at stock markets of Shanghai and Shenzhen in2012as samples. Firstly, choosing2011the year before M&A and2012M&A occurring as event window, the paper refines the modified Jones model, the result shows that the refined Jones model is slightly better relatively by comparing the effectiveness of two models. Secondly, we use the refined Jones model to calculate the industry-classified discretionary accruals and then began to analyze. Thirdly, the paper analysis the influence factors included M&A on earnings management. Finally, draws concludes.(1) To set aside some profit margins for the year M&A coming up, acquirers will take downward earnings management and the discretionary accruals appears more negative number in the year before.(2) In order to avert the declining performance in that year of M&A, acquirers will adopt upward earnings management and the discretionary accruals present more positive number after M&A.(3) The action of acquirers is inclined to varnish over the financial performance compare with that of prior to M&A.(4) About the factors, earnings management with the board meeting frequency, the proportion of executives shareholding, M&A and return on equity are positive correlation, while with asset-liabilities ratio is negative correlation.