Research Of Earnings Management Across Firms' Life Cycle

As the development of economy and the expansion of enterprise scale,the quality of information disclosure of listed companies is increasingly paid by the investors,creditors,governments and other stakeholders.In the modern enterprise system,the separation of ownership and control right,the manager has the opportunistic motive to pursue the maximization of interests.Therefore,the listed companies generally have earnings management behavior.In our country,the academic study of earnings management is deepening,but most of the studies only investigate corporate earnings management from a static point of view,ignoring the enterprise is a continuous development of dynamic entity.Therefore,in order to meet the specific earnings target,it is necessary to study the degree,the way and the economic consequences about earnings management.This is beneficial to the investors and supervisors of the enterprises to identify the earnings management behavior of the managers according to the life cycle stage of the enterprises,effectively to inhibit the excessive earnings management behavior of the enterprises,and to protect the interests of the investors and promote the optimal allocation of resources.Based on the principal-agent theory,the theory of asymmetry information and signal transfer theory,this paper theoretically analyzes the financial characteristics of the enterprises in the growth period,mature period and recession period.This paper also theoretically analyzes the way,degree and economic consequences of earnings management.Based on the 8105 manufacturing companies over 2010 to 2016,we examine the degree of earnings management across different life cycle;we also examine the difference of earnings management for meeting the earnings benchmark across firms' cycle;we further analyzed the impact of earnings management on future performance for mature and recession firms to meet the specific earnings target.The results show that the extent of accrual earnings management and real earnings management are biggest in the recession stage,while the two kinds of earnings management are the least in the growth stage.In order to meet the earnings benchmark,we also find that firm in recession stage only choose accrual earnings management,while the two kinds of earnings management are choose in mature stage.Through further research,we find that the accrual earnings management of mature enterprises in order to meet the earnings benchmark has a positive effect on the future business performance,and the real earnings management has a negative effect on the future performance;the accrual earnings management of recession enterprises will have a positive impact in the short term,but in the long run,accrual earnings management of opportunistic motivation will have a negative impact in the future.In the end of this paper,based on the conclusion of empirical results and the Chinese background,it is suggested that it is necessary to improve the supervision of real earnings management activities,strengthen the level of information disclosure,and enhance the financial indicators to reveal earnings management.This paper is helpful to provide a new perspective for the research of earnings management and enrich the literature about earnings management.It also helps to regulate the behaviors of earnings management in the listed companies in China and promote the improvement of relevant regulations.