A Study On Business Complexity,Investor Attention And Earnings Management

In the course of the company's continuous development and expansion,it will inevitably continue to establish subsidiaries and acquire overseas assets.This series of actions will increase the company's business complexity.The increase in business complexity is accompanied by an increase in the complexity of consolidated financial statements.Existing literature finds that when the operating conditions are more complex and more difficult to predict,managers are more likely to carry out earnings management due to private profits.However,these literatures are mainly based on foreign capital markets,while domestic literature mainly studies business complexity as a moderating variable.There is no literature that specifically studies the correlation between business complexity in domestic capital markets and the degree of earnings management of listed companies.Based on this,a new perspective of business complexity is selected to examine whether business complexity has an impact on the degree of earnings management of listed companies.This article selects the data of all A-share listed companies in Shanghai and Shenzhen from 2007 to 2018 and compares the number of listed company subsidiaries,company assets,income,the number of industries involved in the income,the number of overseas subsidiaries of the company,and the amount of related party transactions.Principal component analysis,integrated into agency variables of business complexity,and empirically studied its relationship with accrued and true earnings management of listed companies,and added regulatory variable investor attention to study its inhibitory effect.In addition,this article also studies the relationship between the complexity of the business and the changes in the accounting firm next year and the inquiry letters from Shanghai and Shenzhen to test the restraint of the accounting firm's earnings management behaviors on listed companies.effect.Through researching this paper,we find that:(1)Enterprises with higher business complexity are more likely to perform accrued earnings management and true earnings management,and the higher degree of accrued earnings management is common in both state-owned and non-state-owned enterprises,while the higher the degree of true earnings management Only exists in non-state-owned enterprises.(2)Both investor attention and the number of analyst follow-ups will significantly inhibit the degree of earnings management of companies with high business complexity,and whether the followers are professional does not affect their restraining effect,and this restraining effect It mainly exists in non-state-owned enterprises.(3)Accounting firms cannot restrain earnings management behaviors of companies with high business complexity.CPAs may not be aware of the risks because they have not found the earnings management behavior of listed companies with high business complexity;or they may have "collusion" with listed companies due to the sticky effect of audit costs,and this phenomenon mainly exists in non-state-owned companies In the enterprise.(4)Listed companies with high business complexity will have both opportunistic and information disclosure earnings management when performing accrued earnings management,while information disclosure earnings management is more advanced and this situation is more common Land exists in non-state-owned enterprises.This article extends the study of business complexity and earnings management to the domestic capital market,and makes up for the shortcomings of existing research,and provides new possible ideas for the research of earnings management.This article puts forward the following suggestions through theoretical analysis and empirical research:(1)Accounting firms should increase the audit time and capital investment of enterprises with high business complexity to prevent them from performing high-level earnings management behaviors and endangering financial The authenticity of the report.(2)External investors should be more cautious in investing in companies with high business complexity,especially those with overseas operations and assets.(3)Supervisors should continue to pay strict attention and supervision to enterprises with high business complexity to prevent them from using the complexity of their own financial statements for earnings management.