Empirical Research On The Influence Of Earnings Management And Annual Report Patch To Accounting Comparability

Report patch is a unique phenomenon on China's capital market, Chinese scholars often equate it to financial restatements in the study of issues about report patch, and study the phenomenon of report patch on China's capital market based on foreign literature review about financial restatements, but they do not deny that there are still some differences between the financial restatements and report patch. Financial reports of listed firms in the USA are publicly disclosed through the SEC's electronic data system(EDAGR),when financial restatements happened, the restated financial reports take the place of the original financial reports by the listed firms, while Chinese listed firms primarily supplement and correct the original financial reports through publishing temporary reports, such as supplementary report?correction report and report on supplement and correction, the original financial reports don't be replaced, so this temporary reports are vividly called " Report Patch ".Existing studies show that implementing accrual earnings management can lead to report patch, but the impact of real earnings management to report patch and the impact of report patch to accounting information quality don't form a consistent conclusion, so this paper incorporates earnings managements report patch and accounting comparability into a research framework to study the effect of different earnings management activities to report patch and the effect of report patch to accounting comparability.Firstly, we analyze and summarize the related literature about the economic consequences of annual patch report, the influence factors of the annual patch report, and the comparability of accounting information, and then make a systematic analysis about the effect of earnings management to annual report patch and the effect of earnings management to accounting comparability, the effect of earnings management and annual report patch to accounting comparability based on Principal-agent theory and Asymmetric Information theory, incomplete contracting theory and Decision usefulness theory, and then put forward empirical research hypothesis. Based on the theoretical analysis, using the Chinese A-share listed firms over the period from 2005 to 2012, this paper examines the relationships between earnings management, annual report patch and accounting comparability. The empirical results indicate that the Chinese listed companies tend to release their annual report patch after implementing accrual earnings management, but the Chinese listed companies are not likely to release annual report patch after implementing real earnings management. Disclosing annual report patch after implementing earnings management may have a positive impact on accounting comparability. This result indicates that annual report patch published by sample firms may rectify disclosed errors or earnings management of previously annual report, as a result, accounting information quality will be improved. Finally, according to the results of empirical analysis, we put some suggests that improving of the disclosure of information disclosure system and the legal system, improving the auditing quality of certified public accountants, strengthen the internal control system.