Research On The Earnings Management Behavior Of San Sheng Education Being Acquired Again

It has been common for listed companies in China to be reacquired.It has been noted that due to the existence of surplus manipulation and other practices,the financial statement information disclosed by enterprises may not necessarily reflect the true value of the enterprise.This restricts the optimal allocation of resources in the M&A market,making the same listed company unable to effectively achieve a reasonable allocation of market resources despite several acquisitions and changes in the actual controller.As a company that has been acquired again,Sangsheng Education’s analysis of its surplus management behaviour after the change of control is of great significance to the improvement of accounting standards and the establishment of a control market in China.It is hoped that this paper will provide insight into what surplus management issues may exist after a company has been acquired again? What are the specific surplus management techniques? What is the impact of surplus management behaviour on financial performance indicators after being acquired again?This paper takes re-acquired companies as the entry point for research,and based on theories of information asymmetry and control privity,the following conclusions are obtained by analysing their surplus management behaviour:Companies that are acquired again,after being acquired,tend to package their acquisition performance.By using the modified Jones model and the Roy chowdhury real surplus management model,this paper measures the conclusion that Trisheng Education also engages in upward surplus management in the year after being acquired.The main means of surplus management for Sangsheng Education after being acquired again are:(1)selling Wangxin Precision at the end of 2017,obtaining a financing gain on long-term receivables that lasted for two years and included in non-recurring profit or loss,resulting in a successful turnaround and beautification of results in 2018;(2)in the year after being acquired,Sangsheng Education improved its net profit by reducing discretionary expenses,especially administrative expenses,while significantly increasing the capitalisation of R&D investment ratio to improve the net profit of the enterprise;(3)surplus management by utilising government subsidies.the amount of government subsidies received also reached the peak since the listing of the company,up by726.24%,by opening up technology projects in 2018;(4)surplus management by utilising accounts receivable to expand sales and increase operating income by relaxing the credit sales policy in order to meet the performance criteria for equity incentives.By analysing the case of Sangsheng Education being acquired,it can be found that the main opportunities for surplus management after the change of control are:(1)the internal governance of Sangsheng Education was not perfect,the internal control system was not strictly enforced and there were deficiencies in information disclosure,giving rise to surplus management opportunities;(2)accounting standards were not perfect and gave companies greater autonomy in areas such as goodwill impairment,which was "(2)the accounting standards were not perfect,giving the enterprise greater autonomy in areas such as goodwill impairment,which was exploited by Sangsheng Education for surplus management;(3)the audit by the accounting firm was not in place.The financial indicators would improve briefly after being acquired again,but the trend of improvement was not sustainable.One year after the acquisition,Sangsheng Education turned a loss into a profit,with net profit attributable to the mother company reaching $114 million,a peak in the last five years.Comparing long-term financial data,it can be found that the solvency of Sangsheng Education has been improved to a certain extent,but the operating capacity has not been improved,profitability has briefly become better after showing a downward trend,and the development capacity has significantly decreased,and the performance of operating income as well as net profit has been falling in the following years,verifying that the better performance in2018 is not the effect of resource integration,but the beautification of surplus management.Finally,for the research content of this paper,recommendations are made from a macro perspective at the company level,the accounting standard level,the external monitoring level and the control market level.This paper selects Sansheng Education as a case company to analyse its surplus management behaviour after being acquired again,in the hope of enriching the relevant literature on the study of surplus management behaviour of re-acquired companies and providing new references for all parties.