An Empirical Study On Directions Of Earnings Management And Investment Efficiency Of Enterprises

The issue of capital investment efficiency has draw a lot of attention, as well as earnings management in the recently capital market. Prior studies have indicated that earnings management can not only affect the investment decisions made by the internal management, but also have influence on the investment decisions of external stakeholders, therefore the investment efficiency of a enterprise will be affected.Learning from the past research articles, the main sample of this study consists of 5025firm-year observations in Shanghai and Shenzhen Stock Exchange from 2011 to 2014. The investment efficiency was estimated by the model of Richardson and its regression value was used as an explanatory variable of our empirical research model. The earnings management was estimated by the Modified Jones model and its regression value was used as explanatory variable.Referring to the previous studies, six control variables were added, they were ROA, SAR, Cont,Shl, Year, Industry. On this basis, we divided the sample companies in accordance with the Modified Jones model calculation of the regression values of positive and negative, to examine the impact of all earnings management directions on the investment efficiency, including positive earnings management, negative earnings management, slightly positive earnings management and over positive earnings management, besides, the investment efficiency was divided intoover-investment and under-investment according to the regression values of positive and negative of the Richardson model.Based on descriptive statistical analysis, correlation analysis, multiple regression analysis in SPSS, the research results indicate that earnings management is negatively related to investment efficiency, its influence mechanism is information asymmetry, as the degree of earnings management gets deeper, which will make the level of information asymmetry between enterprises and enterprises with external stakeholders becomes deeper. To increase the investment efficiency, the managers can reduce the level of earnings management of enterprises; The higher of the positive earnings management, the more likely that the company will over investment.Because with the high level of positive earnings management, the problem of principal-agent problem will be exacerbated, and the managers of the enterprises will over invest to increase their salaries and establish the business empire; However the slightly positive earnings management can ease the lack of investment, the over positive earnings management is on the contrary. Although it did not pass the significant test, the correlation coefficient of the positive and negative also can explain the problem; The negative earnings management will aggravate the investment shortage.On the purpose of huge charge-offs motive to undertake negative earnings management, the most are in the financial crisis, there is not enough cash for enterprises to invest the projects with positive NPV, moreover the negative earnings management also makes it difficult to raise enough external funding, and thus exacerbate insufficient investment.