Research Of Peer Performance On Earnings Management

The 2020 Central Economic Work Conference pointed out that the downside risks and uncertainties of the economy in the world have gradually become prominent,the domestic economic growth has slowed down and various hidden risks have begun to rise.The report of the 19th National Congress of the Communist Party of China emphasized the importance of preventing and mitigating maj or risks.The imitation and follow-up of earnings management behavior among peer companies will affect the overall risk of the capital market.Since the separation of corporate management and ownership,the managers’ earnings management behavior has been the focus of corporate governance.Social psychology research has found that the synergistic effect causes individual behavior to be affected by the behavior of other individuals in the group.The effect is equally applicable to financial policies.The industry relevance of Chinese enterprises’ decision-making is increasing,and enterprises are paying more attention to the performance of their peers when making financial decisions Competitive emulation of corporate earnings management in the industry will create a stock price bubble in the capital market.Abnormal fluctuations in the market will hurt investor confidence and be detrimental to the development of the market economy.By analyzing the relationship between peer performance and earnings management,we can deepen our understanding of the companies’individual behavior from the perspective of peer effects and expand the research on earnings management,which is beneficial to stakeholders understanding of inter-industry corporate behaviorWe combine social learning theory,dynamic competition theory and principal-agent theory to analyze the relationship between peer performance,accrued earnings management and real earnings management of peer companies,and further explores internal influence in the industry.We use rolling window model to construct proxy variables for peer performance,construct earnings management based on modified Jones model and true earnings management model.We use 2012-2018 A-share listed companies in China as research samples to study whether earnings management will be affected by peer performance.Through empirical analysis,we find that the company’s positive accrual earnings management will be affected by the average performance level of companies in the same industry,and the relationship between negative accrual earnings management and peer performance is not significant.Specifically,the higher the peer performance,the higher companies’ accrued earnings management.That is,the decision of companies to accrual earnings management is affected by peer performance We do not find corresponding empirical evidence for the impact of the companies’ true earnings management policy on the peer performance in the industry.In addition,the impact of peer performance in private enterprises on the positive accrual earnings management is more obvious.As the size of the enterprise increases,the sensitivity of accrual earnings management policy to changes in the industry’s average performance level decreasesChina is in the critical period of perfecting the socialist economic system Supporting reforms in many areas are steadily advancing.Information noise and the cost of information search is high.It is a favorable natural experimental environment for the study of peer effects.In addition,we explore the mechanism by which listed companies may adjust earnings management according to the peer performance when disclosing financial reports.We provide relevant empirical evidence,which provides new enlightenment for regulators to better adjust resource allocation in the market Finally,we provide an important theoretical explanation for the differences in the accrued earnings management between companies from the perspective of peer effects,reveal the company’s financial policy formulation mechanism for various stakeholders in the company.We effectively identify and guide corporate earnings management behaviors for the regulatory and provide new ideas for good development.