Study On The Impact Of Economic Policy Uncertainty On Earnings Management Of Enterprises

The authenticity of financial statements of listed companies is directly related to the interests of investors and is a key factor to improve the governance of listed companies.The distortion of financial statements of listed companies is an important factor restricting the realization of high-quality development of China's capital market.The enterprise earnings management decision is an important aspect that affects the quality of financial information.This paper studies the listed earnings management in China from a unique perspective of economic policy uncertainty,that is,empirically analyzes the relationship between economic policy uncertainty and corporate earnings management.Theoretically,economic policy uncertainty can affect earnings management of companies through the two channels of policy cost and manager's principal-agent cost.The policy cost hypothesis holds that in the case of increased uncertainty of economic policies,in order to avoid the policy costs of tax collection and government regulation or to obtain more "mercy" of government policies,they will further make profits for small enterprises,which will increase the degree of earnings management of companies.The principal-agent cost hypothesis of managers holds that as the uncertainty of economic policies increases,their managers will face more difficult operating difficulties.For the purpose of compensation or to keep their jobs,they will further enlarge the profits of enterprises and increase the degree of positive earnings management.Based on panel data of Chinese listed companies from 2000 to 2017,this paper empirically studies the impact of economic policy uncertainty on earnings management activities of enterprises.The empirical results of this paper show that: first,Chinese listed companies will strengthen earnings management activities to deal with the impact of economic policy uncertainty;In private listed companies or small and medium-sized enterprises,economic policy uncertainty has a more significant role in promoting earnings management activities.With the increase of enterprise prosperity,the positive impact of economic policy uncertainty on enterprise earnings management activities will be significantly reduced.In the last study,this paper also considers the impact of economic cycle on the relationship between economic policy uncertainty and earnings management.The empirical results show that after the financial crisis,economic policy uncertainty has a more significant impact on earnings management of companies.The empirical research of this paper extends the research results of economic policy uncertainty and earnings management.Policy implications in this paper,the empirical conclusion has the following two points: first,economic policy uncertainty on the influence of the listed company earnings management behavior cost and managers self-interest motivation mainly comes from policy,the policy cost plays a leading role,so the government should on one hand should properly handle the relationship between the government and market,reduce the excessive intervention in the economy and market,and also need to further improve economic policy to implement the information transparency,make the enterprise and individual as far as possible to fully understand the current policy,and maintain consistency,continuity and comparability of policy,in order to reduce costs they face policy;Secondly,the listed company should strengthen the supervision of the management,ensure the shareholders' right to know the financial situation and business activities of the enterprise,and put an end to the management's selfish behavior without reporting.