Welcome to free paper download website

Models and Characteristics of earnings management of listed companies

Author: XuBo From: www.yourpaper.net Posted: 2007-11-20 02:46:11 Read:
Build surplus management model as a starting point to analyze the motivation for earnings management. According to the expected consequences earnings management and, thus, earnings management body, the body has been generated, began to design the earnings management behavior of the target. Goal-oriented behavior, the subject of earnings management by select earnings management objects, the use of a variety of earnings management means to achieve the goal of earnings management, and evaluation of the results of the earnings management. This process constitutes a cycle of earnings management. The earnings management cycle is not a simple repetition of elements of the various actors, but, depending on the motives and behavior elements of significant change and lead to different consequences of earnings management, the formation of different earnings management mode. According to the motivation of earnings management can be divided into individual self-interest earnings management, system-induced earnings management and organizational goals earnings management. Respectively exhibit different behavioral characteristics.
First, the model and its characteristics of individual self-interest earnings management
Personal self-interest earnings management (hereinafter referred to as "self-interest earnings management") is one of the important mode of earnings management. This mode has the following characteristics:
1. Motives, characteristics opportunism. The motive of self-interest earnings management is the maximization of individual interests, obvious opportunism characteristics. Foreign earnings management research was funded by the compensation contract, which is due to foreign capital markets developed governance structure of listed companies, the high correlation of the managers' compensation and accounting earnings. In addition, the CEO compensation reflects the manager manager market price, reflecting the manager's personal values, managers of listed companies to maximize the benefits to maximize the rewards, the empirical accounting proposed bonus plan assumes .
Maximizing individual interests of listed companies in China is not only a personal maximize monetary income. For managers of listed companies, personal interests not only remuneration income, job promotion, personal on-the-job influence occupies an important position in the personal interests, sometimes the importance of these factors is decisive. The operating results of listed companies is good or bad to some extent reflects the size of the manager's ability to increase job opportunities for advancement, in order to expand the personal influence, managers motivated the implementation of earnings management. In short, whether abroad or in our self-interest earnings management have significant opportunistic characteristics.
2. Behavior contract high. Self-interest earnings management contract related to the operator's earnings management behavior by the complexity of the contract. Operators pay only the simple compensation contract is determined based on the net income of the current report, the motives and means of operating earnings management is relatively simple, that is, through the manipulation of accruals and accounting policies to realize the current to maximize the rewards. Decided to increase the contract paid factors can increase the complexity of the earnings management. Typically, operators paid by salary, bonus, performance plans and stock option plans. Where wages are risk-free after three belong to the risk-reward incentives. Contract performance plans and stock option plans, the operators will also increase the difficulty to manage earnings. Implicit contract if the operator changes will affect the complexity of the earnings management. The complexity of the compensation contract earnings management is also reflected in, usually on the operator's assessment indicators will not be a single accounting earnings indicators, other indicators to join the same cause earnings management is complicated. The complexity of the complexity of the compensation contract caused by earnings management will result in the interests of not balanced, will eventually erode the accounting information in the contract to mitigate agency conflicts, reduce the role of agency costs, inconsistent with corporate objectives.
3. The unpredictability of the consequences. If the principal is fully anticipated at the time of the conclusion of the contract, the earnings management behavior to the agent and the result of the conduct reliable estimates of earnings management behavior is limited, the consequences of such behavior will not affect the allocation of resources and contracts the validity; agents to manage earnings and principal in advance not take into account this effect, the consequences of earnings management affect the validity of the compensation contract, the damage to the interests of the shareholders. The worst outcome is for personal interest considerations agent earnings management on earnings management means to abuse, the extent of earnings management beyond certain limits, seriously affect the investment decisions of investors and capital market allocation of resources effect, resulting in serious adverse economic consequences.
Second, the system-induced earnings management model and its characteristic
In the case of the system, the psychology of personal self-interest is mainly caused by the management of behavior tend to be self-serving results, the power comes from the realization of the objectives of effective incentive mechanism. When the system, rules obvious flaw, the main body of the earnings management system, loopholes in the rules seek to maximize their interests. Thus, the system-induced earnings management (hereinafter referred to as "system-based earnings management") fundamental reason is that there is a system of incentives.
1. Clarity of purpose. Compared with the self-interest earnings management and organizational goals earnings management system based earnings management more specific purpose, in accordance with the requirements of the system, the use of accounting methods or other methods to achieve the institutional provisions of Accounting Earnings obtain the system requires resources .
2. The high level of participation of the accounting staff. In general, earnings management are the main enterprises authorities. Whether it is the choice of accounting procedures, the use of accounting methods and accounting estimates change, or transactions occur de facto control, the final decision rests in the hands of corporate management authorities. Accounting personnel earnings management participants, does not constitute the main body of the earnings management. Especially in China, when it comes to earnings management, decision-making bodies are often the board of directors of listed companies, and in most of our listed companies, financial officers are not members of the Board. For self-interest earnings management, involving the distribution of benefits due to its results, the low participation of the accounting staff. In contrast, in the process of institutional type of earnings management, accounting personnel involvement. The reason is that the center of gravity induced earnings management policies in accounting earnings indicators, such as share placement policy ROE provisions. And accounting data is inherently associated, in this type of earnings management will make extensive use of the choice of accounting method, the use of accounting methods, and the use of the system in order to comply with the requirements of Accounting Earnings, accounting procedures, the accounting method must have a certain continuity. Therefore, for the use of relatively complex accounting methods, if there is no accounting personnel involved, the goal of the system type of earnings management is difficult to achieve.
3. Economic consequences. The economic consequences of the system type of earnings management is obvious. Due to the defects of the system itself, the system of earnings management body has been carefully designed and clever implementation were able to achieve its intended purpose, namely to meet the system requirements of Accounting Earnings and audit by regulatory authorities to obtain the resources in the securities market. On the contrary, if the situation is better in the listed company is not earnings management but have not been eligible to obtain such resources will result in the allocation of resources in the Stock Market dislocation of the economic consequences. the three organizations the target surplus management model and its characteristics
Earnings management in the general sense is a neutral concept. On earnings management division mode, can be found: self-interest earnings management for the maximization of individual interests is not conducive to the interests of the behavioral outcomes, such behavior motivation "impure" deceptive, it will cause the awareness of stakeholders and resist; system-based earnings management because the system itself is flawed and lead to the implementation of earnings management will affect the Stock Market, effective allocation of resources. And this difference, organizational goal-based earnings management (hereinafter referred to as "tissue-type earnings management"), the motivation is to maximize enterprise value, and thus the course of conduct must be accompanied how to achieve the strategic objectives of the enterprise. On the choice of means of tissue-type earnings management does not rely solely on the accounting choices and change the financial reporting of the results, changes in operating decisions, the choice of economic transactions, the choice of the trading point are the means of the organization of earnings management. Of course, due to tissue-type earnings management is involved in the control and management of accounting earnings, the flexibility afforded by the use of accounting standards is inevitable. Therefore, positive sense up to look at the tissue-type earnings management, help from a deeper understanding of the behavioral characteristics of the tissue-type earnings management.
 1/2    1 2 Next Last
Please consciously abide by Internet-related policies and regulations.
Tips: Log in to comment, the user name to enter comments directly from your personal space, so that more friends to meet you.

Sponsored Links

Sponsored Links

Top