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Prevention and Treatment of Earnings Management of Listed Companies in China

Author: LiuFang From: www.yourpaper.net Posted: 2010-04-10 05:08:49 Read:
[Abstract] focus on accounting information to manipulate behavior for a listed company surplus management's current situation as well as the interests of related persons, from the meaning of the earnings management to start, on the basis of a comprehensive analysis of listed company earnings management move due to the, proposed a sound corporate governance structure to improve the quality of accounting standards, to speed up the reform of the regulatory system, to increase the earnings management behavior of external audit efforts to prevent and governance of listed companies.
Listed companies [J]; surplus; motivation; countermeasures

A surplus meaning

Public the stability of China's securities market and listed companies are eager to continue to grow and develop, a listed company earnings management behavior has also become the focus of much attention in the harsh environment and the global financial crisis, the world economic situation continued unrest. Earnings management enterprise management planning transactions and preparing financial reports using the accounting standards the imperfections and accounting policy selectively, according to the professional judgment of the financial report earnings information management, resulting in a financial report accounting information can not fairly reflect the behavior of the financial condition and results of operations of the enterprise. Its purpose is to influence stakeholder understanding of business performance based on corporate accounting information, in order to maximize their own interests or the enterprise market to maximize the value.

Two, the status quo of China's listed companies earnings management

Shenzhen Stock Exchange released the 2007 Annual Report of the Shenzhen board performance analysis report shows: the main business is weakening the impact on company profits, to enhance the performance of listed companies and investment income, operating income, and the contribution of the non-recurring gains and losses close related. Compared to mature market with the overseas listed companies, significantly higher equity investment income accounted for the proportion of the total profit. With the new accounting standard requires a gain on debt restructuring through profit or loss, underperformance will be available through the debt reorganization "Pretty Woman". From the point of view of the disclosure of listed companies in 2008 semi-annual report, with the rising costs and the impact of the global financial crisis, the growth performance of listed companies is high speed decline in comparable companies of all A shares excluding investment gains and fair value changes in the growth rate of total profit decline . The implementation of the new corporate accounting standards restricts the behavior of listed companies by asset impairment policy to manage earnings, listed companies can still manipulate the gain on debt restructuring, confirm the time of investment in securities, the fair value measurement to earnings management. Due to constant revision and improvement of accounting standards, the means of earnings management of listed companies are also constantly moves forward. Therefore, regulate and guide the behavior of earnings management of listed companies in the new situation of the environment is a worthy of further exploration.

Earnings management of listed companies in China motivation

The listed company's earnings figures not only affect the stock price but also many important parameters of the contract and market supervision, the various stakeholders of listed companies is the profit or loss is very sensitive. Flooding, mainly due to the interests of listed companies to maximize the interests of listed companies in China increasingly diverse and complex earnings management behavior requirements as well as owners and managers of information asymmetry, the management authorities to use the information content of the accounting data, especially as the most important figures in the financial statements, accounting surplus to manipulate profits. First, within the company, the accounting earnings management to enter into compensation plans and management decisions based managers for political future, get the prestige, the opportunity for public consumption as well as themselves against dismissal, the use of the the smooth revenue surplus management behavior of company profitability tends to be the intended target. Secondly, in the capital market, the listing of eligibility for funding directly involved the fundamental interests of the company's the accounting surplus stock valuation plays an important role in the company in order to obtain the qualifications for listing, to improve the allotment price and keep the "shell" of the listed companies resources on financial reporting earnings information disclosure and related auxiliary information management was the most prominent. Finally, government regulation, the implementation of a number of regulatory means, by virtue of the company's accounting earnings, coupled with imperfect regulatory mechanisms to escape the industry regulator, the company may also generate earnings management behavior. For example, the imperfections of the tax system to achieve the purpose of the tax avoidance, income equalization in response to the trend of the company's financial indicators deviate from the terms of the debt.

Earnings Management of Listed Companies in China due to the multi-angle analysis

Management of listed companies taken out of the management returns motivation, avoidance motivation, debt covenants motivation interests drive earnings management behavior is an objective reality, Analysis of the five angles from their particular context and conditions.
(A) from the point of view of the transaction costs analysis
Listed companies as a combination of a series of contracts, trading activities through a variety of contract. Accounting earnings as one of the most important contract accounting information the many contract entered into accounting earnings is the foundation and the basis of assessment of the implementation of the contract. The same time, the different contract between the main conflict of interest as well as the contract itself rigid and vulnerability, coupled with the agency relationship formed asymmetric information, the company's management has the information advantage, often through the manipulation of accounting information to avoid default and reduce transaction costs. So earnings management became managers to pass inside information to other stakeholders a tool.
(B) from the angle set by the Accounting Standards analysis
Accounting Standards constraints From a practical point of view of the preparation of the financial report, the restraining effect of earnings management in advance, direct and universal. However, due to the diversity and complexity of corporate accounting practices, accounting standards formulation usually leave some flexibility, allowing enterprises to choose between different specific principles, a variety of accounting treatment in the accounting treatment of the economic and business transactions in the . That deal with the same accounting matters, there are a variety of alternative accounting treatment procedures and methods, so that the statutory accounting policies in the the recognized accounting matters, measurement and accounting report preparation and reporting to provide a larger choice, plus there is a certain time lag between the revised Accounting Practice on Accounting Standards. Accounting information providers to maximize their own interests drive, it may be in violation of accounting standards under the premise of by guidelines vulnerability or not yet standardized blank to bring accounting policies that favor their own performance evaluation or other target, by This led to the emergence of the earnings management behavior.
(C) from the point of view of government regulation analysis
Market IPO in China's securities regulatory system of placement of shares and delisting three rigid constraints, capital market, insurance rights issue, Paul profitability is the direct motivation for many of the listed company management to manage earnings. In addition, the rights conferred on the Companies Act, the Securities Act relating to company earnings management limits, to protect investors and investor lawsuits, preferential tax policies for the choice legal system and its implementation mechanism is not perfect, but also directly reduce the legal risks faced by the company surplus management, resulting in the specification and control of the company's earnings management behavior can not be better.
(D) from the point of view of the corporate governance structure analysis
The basic characteristics of China's listed companies earnings management is under the control of the largest shareholder earnings management, large shareholders through earnings management to achieve the plunder of the wealth of the minority shareholders, small shareholders speculative atmosphere is too strong and widespread free-rider mentality. Poor corporate governance, information disclosure transparency, and even some listed companies board of directors and the general manager of two hats-one, the Board of Directors as the core of the corporate governance mechanism in the supervision of financial accounting reports of the company managers to generate its final disclosure can not play a key role. Lack from the capital markets, the manager market competition, management remuneration weakening external competitive advantage, the company "internal control" a very serious problem, and weak oversight of the independent directors and the audit committee, the audit committee of the board of directors also non-existent, it is difficult to play its functions. All of these factors are a direct result of the occurrence of a listed company earnings management behavior.
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