Corporate Governance, Deferred Income Tax Expenses And Earnings Management

The main consequence of earnings management is the distortion of accounting information,which interferes with the judgment of financial information of statement users,thus leading to decision-making errors,which is not conducive to the protection of investors' interests and the healthy development of enterprises.The current accounting standards for enterprises adopt the assets-liabilities view in an all-round way,and the balance sheet liability method is used to calculate the income tax accounting.The income tax expenses are squeezed back through the balance sheet items,and the principle of the ratio of income and expenses is broken.With the deepening of the reform of accounting and taxation,the purpose of accounting and taxation is quite different,and the difference of taxation is gradually expanding.In 2017,the total difference of Taxation between listed companies in Shanghai and Shenzhen stock markets reached 97.17 billion,which has produced a large number of temporary differences.Projects related to deferred income tax caused by temporary differences play an increasingly important role in financial reporting.The change of deferred income tax fees does not affect the current tax burden of enterprises,and the tax basis of assets and liabilities does not require disclosure,which makes it possible for deferred income tax related items to be used as a tool for earnings management.However,as a tool of earnings management,there is little empirical evidence.The research on this issue has important theoretical and practical significance for identifying earnings management behavior of enterprises,improving relevant information disclosure system and promoting the healthy development of capital market.Taking 1434 A-share listed companies in China as samples,this paper selects relevant financial data from 2008 to 2017,and empirically studies the issue of deferred income tax fees as a tool for earnings management.Firstly,it collects and collates the relevant research results of domestic and foreign scholars,and establishes the theoretical basis for the study.Then,through theoretical analysis,this paper clarifies the impact mechanism of deferred income tax related items on enterprise earnings,and demonstrates the possibility that deferred income tax expenses become a tool for earnings management.On this basis,the relationship between deferred income tax expense and earnings management is empirically analyzed by establishing a model,and the moderating role of corporate governance in earnings management by using deferred income tax expense is studied.The study found that:(1)There is a significant positive correlation between deferred income tax expenses and earnings management of Listed Companies in China.It shows that the existence of deferred income tax expenditure promotes the earnings management behavior of enterprises,and deferred income tax expenditure has become a tool for enterprises to adjust net profit after tax and carry out earnings management.The manipulation of deferred income tax fees will not affect the current payable income tax,but directly affect the income tax fees,and ultimately change the net profit of enterprises,which is a lower cost of earnings management than the manipulation of income and expenses.Moreover,the temporary difference is the difference between the book value of assets(or liabilities)and the tax basis,while the tax basis of assets(or liabilities)is not a compulsory disclosure item at present,and the deferred income tax expense has a strong concealment.Therefore,deferred income tax fees will gradually become an important tool for earnings management.(2)The level of corporate governance inhibits earnings management by using deferred income tax expenses.That is to say,the level of corporate governance is negatively correlated with the degree of earnings management by using deferred income tax expenses.The higher the level of corporate governance,the lower the degree of earnings management by using deferred income tax expenses.Good corporate governance level can promote the effective implementation of supervisory mechanism such as board of directors,board of supervisors,shareholders' meeting and management,reduce agency problems,and achieve the checks and balances of corporate governance.Based on the above conclusions,this paper puts forward the following suggestions:(1)attaching great importance to deferred income tax expenses as a tool of earnings management,accounting supervision departments should formulate the norms of disclosure of enterprise tax basis in time;(2)promoting the research and development of independent tax accounting information system in China,reflecting the changes of enterprise assets and liabilities tax basis comprehensively,continuously and systematically.(3)Improving corporate governance,giving play to the checks and balances between the board of directors,the board of supervisors and the shareholders' meeting,and reducing the opportunistic behavior of earnings management by using deferred income tax expenses.