Research On Earnings Management Behavior Of "Profit Margin Decline" After IPO

IPO(Initial Public Offerings,referred to as IPO)refers to the first time a business or company sells its shares to the public.After the company is listed,IPO companies can raise funds by issuing stocks and increase their visibility to attract outside investment.However,many IPO companies in China’s A-share market have experienced a significant decline in their operating performance after listing,which is also known as the “performancechanging face” phenomenon.Earnings management before the company’s listing is considered to be one of the main reasons for the company’s performance changes.China’s capital market started later than Western countries,and the approval system is the current new share issuance system.On the one hand,the CSRC has set a higher mandatory requirement for the IPO company’s operating results;on the other hand,the IPO price is directly related to the company’s performance.Therefore,in order to be able to successfully list,some companies use earnings management to beautify the business performance and adjust the accounting information of the company during the listing review period.The academic community has used empirical research on IPO company’s business performance and earnings management.People have obtained research conclusions through empirical analysis of large sample data,while case type research is relatively scarce.This paper takes Shaanxi Coal Industry as a research case.Shaanxi Coal Industry successfully listed in 2014.The net profit of the listed company fell by 55% in the year,and the net profit of the following year fell by more than 180%.The research methods of this thesis include theoretical research method,empirical research method and case study method.Combining the existing research results in academic circles,the empirical analysis model is used to consider the degree of earnings management before and after the listing of Shaanxi coal industry.Based on the empirical analysis,we combine the collected data to analyze the specific path of earnings management before and after the listing of Shaanxi coal industry.Moreover,this paper also studies the earnings management behavior of Shaanxi Coal Industry in the two years after listing.We discuss whether the current situation of the sharp decline in Shaanxi coal industry’s performance will affect the earnings management in the post-IPO accounting period.Finally,this paper combines the research case of Shaanxi Coal Industry,we put forward suggestions on how to prevent IPO company’s earnings management activities leading to “profit margin decline”,including IPO system construction,external audit quality,accounting standards and laws and regulations,the identification of earnings management,and the internal governance of the company.The conclusions of this paper are as follows: 1.In order to meet the listing conditions and raise more funds,Shaanxi Coal has beautified the company’s operating performance level before the IPO through earnings management.The main means include related party transactions,production control,and packaging sales gross margin;2.Shaanxi coal industry’s performance after the IPO fell sharply.In order to reduce the degree of loss,the management adjusted the operating results through changes in accounting estimates and asset restructuring with related parties.3.From a long-term perspective,earnings management does not bring tangible economic benefits to enterprises,and earnings management behavior affects the normal production and operation activities of enterprises and aggravates the degree of “profit margin decline”.Earnings management has also failed to curb the decline in performance.Based on the above conclusions,this paper hopes to help the regulatory authorities to strengthen the management of IPO companies’ earnings management behavior and prevent the “profit margin decline” phenomenon brought about by earnings management,and provide certain theoretical support and experience.