The Influence Of Information Disclosure Policy On Real Earnings Management

The researches on the relationship between information disclosure and earnings management have attracted much attention in theoretical and practical cycles home and abroad. The existence of information asymmetry between corporate managers and investors provides chances for the corporate to carry on earnings management to improve its profit. However, sufficient information disclosure may, to some extent, reduce the possibilities of information asymmetry, which will help the investors to make a judgment on the abilities of managers on the earnings management, thus, minimizing the possibilities of earnings management. Generally speaking, obeying the accounting standards, proper earnings management is not bad. Nevertheless, in a long term, it may damage the corporate value and obscures the corporate real performance, which may confuse the investors who may not make effective investment. Therefore, the external regulators should develop information disclosure policy and form a strong external constraints and oversight mechanisms, to reduce managers’ earnings management behaviors. This can protect the interests of outside investors, and promote the sustainable development of the company, and ultimately benefit the stability and development of the capital markets.After many years’development, China’s relevant regulatory agencies and departments have gradually established and improved the information disclosure system of public companies. Shenzhen Stock Exchange formulated the "The assessment methods for information disclosure of public companies in Shenzhen Stock Exchange", which improves the transparency of information of public companies on the whole, but there still exists the phenomenon of some public companies which disclose information illegally or reduce information transparency to match its earnings management. Therefore, it is significant to carry on the study of the relationship between earnings management and information disclosure, which will improve the information transparency and curb the earnings management behaviors.Numerous foreign studies on this topic have been carried out, while there are a few relevant studies in china, needless to say, most of the latter studies hold the opinion that there is a negative correlation between information transparency and earnings management, that is to say, the more transparency of information it disclosures, the less management of earnings it needs. Besides, domestic documents on this topic mainly research from the perspective of accrual earnings management, hardly focus on the study of real earnings management.In recent years, scholars have noticed that accrued earnings management and real earnings management are two different aspects of earnings management. The act of managers manipulating investment, financing, operation and other practical trading activities (e.g., abnormal markdowns, cut R&D costs, excess production) to achieve the purpose of the surplus earnings manipulation is called real academic earnings management. Compared to it, real earnings management is more difficult to be identified by stakeholders, as well as it carries lower examination and lawsuit risks.With the strength of external supervision and the improvement of legal system and information disclosure policy, is it possible for the managers transfer from accrued earnings management to real earnings management? Will managers reduce the real earnings management behavior? This is a question worth considering. However, fewer studies involving the impact of information disclosure on real earnings management, and rarely consider it from the effectiveness of the policy. Therefore, this paper will study the impact of information disclosure policy on real earnings management.This paper will use theory method and empirical methods and study the influence of information disclosure policy on real earnings management, in order to enrich the relevant theoretical research, and make investors concern it, and provide advice for policy-makers and regulators. This paper includes the following six chapters:Chapter one:Introduction. The chapter introduces the background, the purpose, the significance, the ideas, the methods, the framework and the innovation of the research. Chapter two:Literature Review. The chapter reviews the literature about information asymmetry and information disclosure, information asymmetry and earnings management, and the related research of information disclosure and earnings management. These documents mainly research them from the perspective of accrual earnings management and concern little about the effectiveness of information disclosure policy, which lead to this paper’s research.Chapter three:Theoretical Basis and Theoretical Analysis. First, this chapter explains and analyzes agency theory, asymmetric information theory and the efficient market theory. Second, this chapter defines the concepts of information disclosure policy and real earnings management. Third, this chapter analyzes how information disclosure policies affect real earnings management theory.Chapter four:Design of Research. Firstly, this chapter put forward the first hypothesis on the base of last chapter of the theory, which is that the more effective the information disclosure policy is, the lower real earnings management is. Then, this chapter use the Shenzhen Stock Exchange A share public companies from2009to2012, and use the Roychowdhury (2006) model to measure the extent of real earnings management, and use the Shenzhen Stock Exchange’s information disclosure evaluation results to measure the information disclosure policy. In addition, this chapter use some related variables to control the effect of the regression.Chapter Five:Empirical Results and Analysis. First, this chapter describes every variable, and use Pearson to analyze the correlation among variables. Then, this chapter regress the model by stata11.0software. Finally, this chapter makes the robustness test.Chapter Six:Research Findings, Policy Recommendations, Limitations and Research Prospects. This chapter draws conclusions on the base of the empirical study and makes appropriate policy recommendations. Meanwhile, this paper points out the limitations and future researchers related to information disclosure and real earnings management.Through empirical study, this paper draws the following conclusions:First, overall, real earnings management reduces with the improved information disclosure policy. The results show that the inhibition of information disclosure policy on real earnings management has some validity, but due to the low risks and high secrecy of real earnings management, information disclosure policy effectiveness has not played a full role.Secondly, these pubic companies are divided on the base of real earnings management motivation. The results show that when the motivation is weak, the information disclosure policy have significant role on the real earnings management. But when motivation is strong, the information disclosure policy cannot have significant role on the real earnings management.Third, these pubic companies are divided into non-state-owned enterprises and state-owned enterprise. The results showed that information disclosure policy affect real earnings management when samples are state-owned enterprise.This paper may have such innovations:First, this paper has innovation of perspective. This paper researches the relation between information disclosure policy and real earnings management in the new perspective of real earnings management.Secondly, this paper researches the relation between information disclosure policy and real earnings management from the new perspective of the nature of property rights.Third, according to the information disclosure of different degree of influence on different real earnings management methods, this paper analyze the effectiveness of information disclosure policy and explore why information disclosure policies have failed to pay the role.This paper may have such inadequacies:First, this paper only choose the Shenzhen Stock Exchange’s A share public companies as samples, which may lead to that this paper’s conclusions cannot be fully applicable to all public companies in the China.Secondly, the measure of variables has limitations. This paper use the Shenzhen Stock Exchange Information Disclosure Information Results as the measure of information disclosure policy, but whether the results of this evaluation can completely replace the information disclosure policy, indicators have yet to be confirmed by further research.