Analysis Of Earnings Management Under The Background Of Pledge Of Geo-jade Petroleum

Equity pledge emerged in the 20 th century and was widely used in listed companies as a new financing method.Equity pledge is favored by listed companies because of its relatively loose policy and strong liquidity.Equity pledge has injected vitality into the capital market and brought certain risks to the company at the same time.Equity pledge means that the company needs to bear the risk of control transfer brought by the decline of stock price.In order to solve this risk,the company has a strong motivation of earnings management to manipulate profit and whitewash statements to achieve the purpose of improving the company's stock price.At present,most of the research on equity pledge and earnings management is based on empirical analysis,which uses large sample data to prove the relationship between them.However,the details of the way,consequences,risks and other aspects of the impact of equity pledge on earnings management have not been solved in the empirical analysis.Therefore,this paper will answer the above questions in the way of case analysis.In addition,with the increasing number of companies with high proportion pledge,high proportion pledge has become the development trend of listed companies.Therefore,this paper chooses Geo-Jade Petroleum Corporation with a high proportion of pledge as the research object,discusses the issue of earnings management in the context of its high proportion of equity pledge,reveals the potential problems and risks,provides reference for other similar high proportion of equity pledge companies to standardize corporate governance,helps information users to identify earnings management behavior of listed companies,more fully provide the basis for investment decision.It is found that Geo-Jade Petroleum Corporation has significant earnings management motivation before and after equity pledge.To expanding financing scale before equity pledge and risk prevention after equity pledge,the company will use earnings management to adjust corporate earnings.With the increase of pledge ratio,the external supervision is further strengthened,and the way of earnings management has changed from accrual earnings management to more concealed real earnings management.Geo-Jade Petroleum Corporation adopts such accrual earnings management methods as adjusting bad debt provision of accounts receivable,depreciation rate of fixed assets,changing recording currency,etc.,as well as expanding credit sales policy,adjusting non-recurring profit and loss,related party transactions,asset restructuring and other real earnings management methods to manipulate profits and whitewash financial statements.The earnings management of Geo-Jade Petroleum Corporation can adjust the company's earnings to some extent in the short term,but it is not significant in the long term.In addition,the risk brought by high proportion of pledge leads to the continuous deterioration of the business environment of the company,which seriously damages the company's development ability.The high proportion of equity pledge maximizes the level of earnings management of Geo-Jade Petroleum Corporation,and the space of surplus earnings management is limited.Finally,this paper puts forward suggestions to strengthen the risk control of equity pledge and earnings management from internal and external aspects.