"Remove From Reality To Virtual", Earnings Management And Market Response

In recent years,China's economy has entered a period of new normal.With the slowdown of economic growth,the real sector has gradually become "dull" while the virtual sector has become "active".The focus of market economic activities has transferred from the production field to the financial field,and there has been a phenomenon of "Transform the economy from real to fictitious" in China.Specifically,with ignoring the internal growth of their own real sector,public companies are more and more keen on the financial investment industry,which lead to the accumulation of profits in financial channels has gradually became the dominant part in corporate profits and the proportion of investment in productive assets continues to decline.This phenomenon of resource mismatch can easily reduce the innovation and industrial investment of enterprises,induce the formation of virtual asset bubbles,and affect the long-term and stable development of enterprises.Therefore,in order to prevent the excessive virtualization of enterprise funds and adjust the allocation of enterprise capital,in the context of promoting the high-quality development of China's economy,it is of great practical significance to study how to realize the high-quality development of enterprises.This paper uses a combination of event study and case study to discuss the company Youngor as an example to ponder the appropriateness of enterprise behavior and put forward some suggestions to enterprise management and government supervision departments,through analyse its path of from the real to the virtual,and observe the results of the market reaction to its financial investment management behavior.In the case part,firstly,it introduces the development of three business segments of Youngor's in order to understand the basic situation of the company.Secondly,it calculates the data in the annual report of listed companies to get the degree of Youngor's "Transform the economy from real to fictitious".Then analyzes the path of the enterprise's "Departing from Reality for Virtuality" on the basis of the previous description in detail,consulting relevant materials to summarize the means of earnings management by using financial assets and uses the event study method to observe the market's response to its behavior.After that,we come to the conclusion.The financialization trend of Youngor's is so clear.The enterprises deepen the degree of this phenomenon by increasing the investment proportion of financial assets and using financial assets for earnings management,and the market has a significant negative response to this phenomenon.Youngor's behavior has a great impact on the net profit,and also on the company business risks.Relying on the income of virtual assets to fulfill the profit and ignoring the internal growth,Youngor has declined of the core competitiveness and sustainable development in the long run.Relying on the surplus management behavior to adjust the enterprise profit will not last long with the tightening of regulatory policies.