Research Of The Impacting Factors On Earnings Management Towards Classification Shifting

On March 24,2017,Financial fraud of Huishan Dairy(HK.06863)resulted in stock price plummeted 85%,and evaporated the market value of 30 billion HK$,which led to grievous losses of investors.This "flashback" incident has fully proved that accounting information distortion in financial statements can mislead investors,creditors and other stakeholders in the decision-making,thus undermining their interests.The abuse of earnings management,which is one of the important factors involved in the distortion of accounting information.At present,the research on accruals earnings management and real activities earnings management has already achieved fruitful results.However,research on the new type of earnings management-Classification Shifting are still lacking,though,classification shifting earnings management is also an important factor that affects the quality of accounting information.In the meantime,following the improvement of the accounting system and regulatory rules,the manipulate space of accruals earnings management and real activities earnings management have been gradually diminished,instead,the classification shifting earnings management has become a new tool for listed Company to whitewash their real business because of its greater covertness and lower implementation costs.To date,the domestic research on the earnings management of enterprise classification shifting only concerned the study of existence and motivation,but few studies has focused on the influencing factors of the behavior.In order to improve authenticity of accounting information and effectiveness of system supervision,it becomes an urgent issue that how to find and control the behavior of classification shifting earnings management.In this thesis,we firstly extracted from the influencing factors involved in the earnings management behavior of enterprises by combing the theory and literature of domestic and foreign scholars researches on the classification shifting earnings management.Then we put forward the relevant assumptions based on the theoretical analysis,and drew on the lessons of McVay's(2006)abnormal core yield forecast model and Haw's(2011)empirical model,after that we made sub-industry annual OLS regression by taking China's 2011-2016 Shanghai and Shenzhen A-share listed companies as the research sample.Finally,we analyzed the results and put forward relevant policy recommendations.The results show that: the enterprise tends to manipulate classification shifting earnings management under the circumstances that the accounting flexibility of a firm is small and the competition in the industry is fierce.Also,the higher proportion of large shareholders,the higher efficiency internal management,the higher proportion of institutional investors,the less organized changes of Corporate earnings management changes.It's worth to be noticed that the restraining effect of institutional investors can only be found in the state-owned enterprises.In addition,the restraining effect of the CPA auditing on classification shifting earnings management is not found,which may due to low level of auditors' concern and attention on classification shifting earnings management.Therefore,the research in this thesis not only enriches the study about classification shifting earnings management,but also helps the company to improve its own organizational structure and the quality of accounting information in financial statements.Moreover,this thesis provides new clues for the audit who responsible for the practice of the auditors.It's also has certain reference value for the regulatory authorities to amend the regulatory rules and investors to identify the true performance of the business.