| For the insurance industry in China,the implementation of the C-ROSS is historic.the C-ROSS regulatory system determines the actual capital and minimum capital of the company based on accounting,which also determines the important position of accounting measurement in the C-ROSS system.According to the requirements of the C-ROSS,the classification and measurement of financial assets of insurance companies have a strong relationship with the minimum capital requirements,and the classification of financial assets determines the type of solvency risk faced by insurance companies and the risk factors of minimum capital requirements,which in turn affects the minimum capital measurement requirements of insurance companies.As a result,the classification of financial assets significantly affects the ability of life insurance firms to remain solvent.At the same time,different asset classification accounting treatment is different,affected by the capital market,and presented differently in the financial statements.And to some extent,the surplus of the business would also be impacted.Earnings management is common in China’s non-financial listed companies and commercial banks,so will insurance companies also have surplus management in financial asset classification? Moreover,in2016,will the official implementation of China’s the C-ROSS have an impact on the degree of surplus management of insurance companies? What is the impact on insurers with different solvency adequacy ratios? This essay examines the aforementioned issues as well as the phenomena of life insurance companies’ earnings management.The capital market has a significant impact on the financial assets of life insurance firms,which make up more than 50% of their total assets.This phenomena of employing accounting classification for earnings management is also more prevalent.Based on pertinent information collected from 52 sample life insurance firms between 2010 and 2021,This study investigates how the C-ROSS affects the level of earnings management through financial asset classification of life insurance companies with different solvencies.In this paper,the difference-in-differences model has been built for the empirical research,and the parallel trend test is passed in this study to demonstrate that the implementation of the C-ROSS has an effect on the earnings management of life insurance businesses.The robustness test was carried out by two placebo tests,PSM-DID propensity score matching double difference model,replacement of explanatory variables,exclusion of other policy interferences,and traditional two-stage DID regression.In addition,this paper also analyzes the heterogeneity according to different types,nature of ownership,whether it belongs to a group company,size,concentration of shareholding,and source of auditors.The results of this paper show that: First,according to the earnings distribution method,there is a surplus management phenomenon in life insurance companies,indicating that life insurance companies have a positive earnings management phenomenon in order to avoid losses.After the implementation of the C-ROSS,the phenomenon of surplus management has increased significantly.Second,The degree of earnings management of life insurance businesses is affected differently by the C-ROSS deployment.Life insurance companies with low solvency adequacy ratios are more affected by the C-ROSS,which increases the degree of surplus management of such life insurance companies through financial asset classification;This phenomenon continued in 2016 and continued until 2017,and disappeared after2018,indicating that such earnings management will be reduced after meeting regulatory requirements.Third,other factors,including surrender rate,policyholders’ savings and investment funds,changes in fair value,and surplus status,will have an effect on earnings management of life insurance companies,but there is no connection between premium growth and earnings management.Fourth,state-owned life insurance companies are subject to greater state supervision factors,are more inclined to sell financial assets,and when the solvency adequacy ratio is low,State-owned life insurance firms have a higher level of surplus management than non-state-owned life insurance companies.When solvency supervision pressure is greater,life insurance companies under group companies have stronger anti-risk ability and lower degree of earnings management than non-group life insurance companies.Large life insurance companies are well-capitalized and tend to enhance their earnings management behavior according to capital market fluctuations to resist risks,and large life insurance companies under high regulatory pressure have a greater degree of earnings management than smaller life insurance companies.Life insurance companies with low equity concentration are less affected by shareholders,management agency costs are higher,and solvency supervision pressure is greater,their earnings management will be higher.In addition,the stronger the supervision of auditors from the Big Four,the lower the level of earnings management of life insurers facing high solvency regulation.Based on the viewpoint of financial asset classification,the research conclusion of this work adds to the pertinent literature on earnings management and the application of The C-ROSS policy based on the perspective of financial asset classification,and enriches its empirical research on the solvency supervision in the field of insurance company surplus management and the C-ROSS.Finally,the policy recommendations in this report are based on the study’s findings.,increases the implementation of the C-ROSS II project,and further improves the solvency supervision system.Pay attention to asset-liability matching management to achieve a risk-return balance;Adjust asset allocation,make accounting policy choices,and companies and regulatory authorities should collaborate to ensure the code’s smooth implementation;Enhance external supervision and raise the standard of information dissemination. |
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