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ST listed companies in asset impairment Behavior

Author: LiGang From: www.yourpaper.net Posted: 2009-07-10 23:17:36 Read:
Abstract: ST listed companies can be found by comparative analysis of ST listed companies with the control 1999-2003 asset impairment behavior, impairment of assets to manage earnings patterns of behavior. ST listed companies by ST-provision for asset impairment, but had disclosed losses making substantial write-off, will take advantage of higher asset impairment.
Keywords: asset impairment; earnings management; ST listed companies

1 of the problem

Listed companies, asset impairment accounting norms experienced three major changes: (1) in 1998, the Corporation accounting system, to give the A-share listed companies the option of four asset impairment, enforced since 1999 ; (2) "enterprise accounting system" in 2001 the scope of the impairment of assets continue to expand the reach eight; (3) 2006 "Impairment of Assets" standard requires assets impairment loss is recognized in subsequent accounting period shall reversed. " The focus of the issue is that the change of asset impairment accounting norms given more professional judgment permission of listed company managers, business managers rational use of these permissions accurately reflect the fair value of the assets related more cautious accounting information? Or take advantage of these privileges to adjust accounting earnings and the carrying amount of assets to manage earnings?

Literature Review

Object to the impairment of assets as empirical research is basically focus on the following aspects: the motivation of the impairment of assets, identify the method of handling the asset impairment, an impairment of the asset market effects. Consider the correlation, and in this study here only recalled the literature of the first two aspects.
2.1 Impairment of assets motivation
The asset impairment motivation is to pass information to the capital market expectations and valuation. Managers may affect the short-term stock price performance by asset impairment adjustment surplus, Chen Zhenyu, Wang Sheng-Xue Shuang meager profit of listed companies in China (2004) found that the bad debts adjustment surplus. But on the other hand, managers may be the behavior of the market by asset impairment pass information managers about the company's future cash flow expected asset value is more fair.
Impairment of assets The second motivation is to pass information to the generalized contract based on accounting data. Managers may affect asset impairment formulation and implementation of the contract based on accounting data and to increase their own wealth, also known as opportunistic motives, Li Zengquan (2001), and Cai Xiang, Zhang Haiyan (2004) found that the listed companies in China to take advantage of the impairment of assets cater Rights Issues, especially handling the evidence of regulatory policy.
2.2 Identification handling asset impairment method
Identify whether managers manipulating asset impairment is a problem that must be addressed in the study generally includes comparative analysis method, specific impairment project the econometric model method (McNichols and Wilson, 1986) and the distribution of Inspection Act (Huwei Ying, Xu Zhihan and HU Xin-hua, 2003) several. Direct measurement and quantification, the comparative analysis is not manipulating asset impairment managers to classify samples but in accordance with pre-determined the case manager may have impairment of assets motivation, even whom with the control sample, then the sample observation group differences between asset impairment indicators, through the design of multi-factor regression model description of the observed differences are indeed caused by the motives; This method is the most widely used in asset impairment empirical study, Li Zengquan (2001), Chen Zhenyu, Wang St. and Xue Shuang (2004) and Cai Xiang, Zhang Haiyan (2004), the use of this method is to carry out research.

3 hypotheses

According to the Shanghai Stock Exchange Listing Rules "special treatment" control policy is a broad contract based on accounting data, the net profit of the listed companies is one of the core indicators, with the occurrence of loss and continuous, listed companies are subject to regulatory pressure Vietnam , the stronger motive affecting the execution of the contract by reducing losses. Therefore, this paper establishes the following assumptions:
Assuming: ST listed companies net profit before special positive year than the general corporate extract less for impairment to delay losses appear; assumed: ST listed companies net profit before special processing negative for impairment extract more than general corporate and special year, "huge amounts written off that loss is inevitable;
Suppose: ST listed companies net profit special treatment as a positive annual extracted less than the average company for impairment, an impairment reversal phenomenon appears to turn around to avoid delisting.

4 sample selection and variable definitions

According to the comparative study method, we first special treatment from the Shanghai Stock Exchange in February 2004, 51 listed companies randomly select 30 comprising the study sample. For these ST companies at the same time in accordance with the same industry, with the scale of the principle with a comparison sample of 30. The sample of the original data from the website of the Shanghai Stock Exchange 1999-2003 annual financial report, data analysis using EXCEL and SPSS software.
The mainly observed impairment of assets of listed companies when the profits for the year to affect the situation, the study of reference to Li Zengquan (2001), current assets impairment provision ratio (CA, CA1, CA2, CA3, CA4) indicators to reflect. Table 1 summarizes the calculation formulas and instructions of such indicators.

For comparative analysis of asset quality, the paper also calculate receivables turnover ratio AT (main business income divided by the impairment of receivables average before) and inventory turnover rate of IT (main business cost divided by the inventory before impairment average) as the quality of these two assets substitution variables.

5 Empirical results

To test the hypothesis, the study sample ST listed companies from 1999 to 2003 data is divided into four time periods: positive annual net profit before special negative annual net profit of special treatment, special treatment annual and special positive annual net profit after treatment, comparing the two sets of sample data asset impairment, respectively, at different time stages, Table 2 shows a significant difference in the comparative indicators data.
Compare data from the table, we can find three assumptions basic verification:
Four time periods (1) ST listed companies in the sample group's receivables turnover and inventory turnover rates are significantly lower than the control sample group, indicating that the difference between the asset quality.
(2) Before the special treatment of ST listed companies net profit is positive annual (Panel A), ST listed companies current asset impairment provision ratio indicators with no significant difference in comparison companies, but we also found that, in this time stage where ST listed companies in asset quality has declined, while the provision for asset impairment and no significant difference with control company, which to some extent reveals ST listed companies in the provision for impairment of assets, special treatment to delay the disclosure of losses earnings management behavior, assuming an agreement.
(3) Before the special treatment of ST listed companies net profit for the negative annual (Panel B), ST listed companies relative to comparison companies provision the higher inventory devaluation ready and total assets for impairment; ST listed companies in special treatment (Panel C), current debt provision, the current inventory impairment provision ratio, the current long-term investment impairment impairment accrual rate and the current total assets are significantly higher than the control companies. This verifies the assumption two.
(4) After the special treatment of ST listed companies net profit is positive (Panel D) for the year, ST listed companies diminution in value of inventories current the provision ratio data is less than zero current provision ratio and total assets for impairment and significantly low data in the control sample of companies, the existence of the reversal phenomenon, which validates Hypothesis 3.
Panel B and Panel C (5) in the comparison table can be found ST listed companies is higher than in the year in which the special provision for asset impairment loss for the year before the ST index, for example, to a current total assets impairment provision in the ST The loss before year mean and median are 3.06% and 2.36%, 8.57% and 3.56% in ST when the indicators mean and median, which to a certain extent on the ST system as well as the subsequent delisting system of continuous losses the company had a greater control effectiveness, relative to the general loss companies, ST listed companies had disclosed losses will be ST year increase earnings management efforts, even more huge write-off.

Comparative study of more than four time stage impairment data and stock decline in value of the total assets of preparing the data and found strong evidence support the hypothesis, only found in certain time periods for impairment data and assumptions consistent evidence, which explains to some extent the comprehensive utilization of the asset impairment ST listed companies to manage earnings, four asset impairment policy for inventory impairment more.
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