The Standards Of The NEEQ's Stratification System And Earnings Management

Since 'Decision on related questions about the NEEQ's distributed by the State Council of the People's Republic of China on December 2013,the NEEQ market began to enter the high-speed developing stage with the number of listed companies increasing.In order to further accelerate the promotion of 'the Multi-level Capital Market' of China,the NEEQ issued the 'Exposure Draft of the NEEQ's Stratification System' on November 24,2015,which divides all the listed companies in the NEEQ into two layer,Innovation Layer and Basis Layer.The stratification system can help to achieve the development strategic plan of 'multi-layer,step by step',which in line with China's domestic features.Combine with the NEEQ's positioning on serving innovation-oriented companies,entrepreneurial companies,and growth companies,the Stratification System sets up three sets of stratified standards to screen out different types of companies into Innovation Layer.There are some companies whose actual operations can't meet the standards of the Stratification System hoping to get the favorable policies through getting into Innovation Layer.As financial indicators are involved in two standards of the Stratification System,with strong maneuverability,these companies mentioned above may use earnings management to realize self-interest.In this text,we choose the companies listed on the NEEQ as objects of study,which aims to investigate the change of earnings management before and after the setting of the Stratification System.Besides,we hope to investigate the relationship between each standard of the Stratification System with earnings management.And we further explore the relationship between the number of Market Makers and earnings management,and accordingly put forward suggestions about optimizing the standards of the Stratification System.We expect to get the conclusion that there is something irrational exists in the standards of the Stratification System.The Standard 1 and Standard 2 may lead to earnings management of some companies.These companies may try to take advantage of earnings management to meet the requirements of the financial indicators to be classified into Innovation Layer.At the same time,the requirement on the number of Market Makers in Standard 3 may help to restrain earnings management.This paper will also provide some policy suggestions about the Stratification System and related supporting system based on the research results.