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毕 业 设 计（英文翻译）题 目 我国上市公司盈余管理的实证研究系 别： 经济管理学院专 业： 财务管理班 级： 学生姓名： 学 号： 指导教师： Earnings Management of Chinese Listed Companies:A Survey of Empirical StudiesIntroductionIn the 1950s, western researchers of accounting introduced positive philosophy and positive economics to the theoretical research of accounting. Not until the 1960s and 1970s did the introduction gradually develop into the positive accounting theory, as the means of explaining the problems and predicting the future development in the practical application of accounting. In 1986, Watts and Zimmerman made a systematical summarization of the main positive accounting achievements in their new book Positive Accounting Theory (Watts, etal., 1986). The publication of the book, therefore, became landmark of the establishment of a new subjectpositive accounting, which is notable for its special system and remarkable characters arising from accounting and positive economic. Since then, articles on positive accounting have almost dominated the most influential journals of accounting in the United States. Whats more, the researches have been made in the rest of world and the main accounting journals in Australia, Britain etc. are also attaching great importance to positive accounting. However, China is still a newcomer in this field. No positive accounting researches were introduced to China until the late 1980s. In recent years, tentative researches have also been made in this field. Some researchers have successfully applied positive accounting theory to analyze the earnings management of the listed companies in China. These researches have paved the way for further study and offered a new research direction. I. Empirical Studies on the Motivations of Earnings Management Earnings management can be defined as the best accounting policies or the accruals control, chosen by the management of enterprises to make the earnings reach the expected level under the pressure from the relevant stakeholders and the constraints of public accounting principles, so that the value of enterprises can be maximized. Generally speaking, in addition to the choice of accounting policy and the control of accruals, the means of earnings management have also included lobbying for the regulatory organization to modify the public accounting principles and the manipulation of profit figures in the fiscal report. This paper will make some general discussion on this issue. The phenomenon of earnings management will lower the reliability of the information content of accounting earnings announcements in stock market. However, it is common in the listed companies of China. The motivations of earnings management of Chinese listed companies can be summarized as follows: the exaggerating financial packing for initial public offering (IPO), for the purpose of rationed share acquisition, escape from being “delisted”, “special treatment”(ST), “particular transfer”(PT), inside dealing and the manipulation of stock prices. By positive study, some Chinese researchers come to the conclusive that Chinese listed companies have these motivations of earnings management indeed.1. The study of the exaggerating financial packing for IPOIn the past years, IPO price was strictly controlled by the government. Although nearly every year China Securities Regulatory Commission (CSRC) revised the regulation on stock issuing price calculation, the basic principle hasnt been altered. Normally, stock issuing price equals to multiplying advisable issuing priceearnings ratio (P/E) by earnings per share (EPS), in which the issuing P/E usually was limited between 12 and 15 by CSRC. As a result, under the restriction of issuing P/E, the companies eager to go public would manipulate EPS in order to enlarge it1. Aharony, Lee and Wong (1999) examine the financial packing of IPO by the case of B-shares and H-shares in China. On the base of their research methods,Wei,Tan and Lin (2000) investigate the fluctuating earnings before and after IPO by the case of A-shares in China from 1992 to 1995. The empirical evidence shows, except for several industries, such as public utility and real estate, ompanies exhibit a strong profitable ability according to the fiscal year report before IPO, whereas, this “ability” drops dramatically at the stock issuing year and declines year by year. Does the arnings management result in this dramatic change? We should prove this hypothesis. They make an empirical study by a sample of public utility and industrial listed companies, referring to the DeAngelo Model. The empirical evidence shows that the earnings management in the industrial listed companies supports this hypothesis effectively before IPO, while the degree of earnings management in the listed companies of public utility is lighter. However, the research has not adopted a relatively more accurate econometrical model. In addition, the data samples are not coherent in the two empirical sections, weakening the interpretation of conclusions. Moreover, by far, we lack the empirical study of the relationship between the earnings management and stock pricing behavior, which needs further study in China2. The empirical study on the earnings management of listed companies for the purpose of rationed share acquisitionIn China, the majority of our listed companies consider the rationed share acquisition as the best channels for raising funds after they become public. However, it needs strict qualifications to attain the rationed share acquisition. Jiang Yihong (1999), Chen Xiaoyue, Xiao xin, and Guo Xiaoyan (2000) make empirical studies, which concludes that the authorities of listed companies obviously make earnings management to attain the qualifications for rationed share acquisition stipulated by CSRC, bringing about the special “10 percent phenomenon” in our stock market. According to Jiang Yihong(1998), when the listed companies expect that either the EPS will be less than zero or the return on equity (ROE) will be less than 10 percent, they will have drastic motives to manipulate profits in order to make the EPS slightly larger than zero or make the ROE slightly larger than 10 percent. We call “the EPS slightly larger than zero or the ROE slightly larger than 10 percent” as sensitive range of profit driving. Meanwhile, he confirms by case study that some listed companies have the behavior of earnings management when EPS and ROE lie in this sensitive range. Based on the above research, Jiang Yihong (1999) inspects whether the listed companies with EPS and ROE in the sensitive range have the behavior of earnings management, with their relevant data in the annual report of 1997. The conclusion shows that the listed companies whose EPS is slightly higher than the break-even point and the ROE is slightly higher than the critical point of qualification for rationed share acquisition do have the behavior of earnings management in the year of 1997. According to Chen Xiaoyue et al.(2000), by dividing the sample into three parts5 - 9 percent, 10 -12 percent and over 12 percent net assets rate of returns after tax and taking the 5 -9 percent and over 12 percent groups as comparative samples, he studies whether the companies whose net assets rate of returns after tax range from 10 to 12 percent have the obvious behavior of earnings management. Based on Jones model, Han and Wangs (1998) methods for reference, Chen modifies Jones model, retaining the main parts of the model and adding dummy variables to judge the behavior of earnings management. The study states that in order to attain the right of rationed share acquisition, the listed companies at the critical point have strong motivation of earnings management, they take advantage of the asymmetric information and the imperfect contract (that is, only depending on the rate of returns on net assets to decide the right of rationed share acquisition) to manipulate the earnings for this right.3. The empirical study on the earnings management to avoid being delistedThe listing qualification of the companies is a rare resource. At any cost, the management authorities and the boards of the listed companies, responsible department and local government will try their best to avoid the listed companies being delisted due to having been at a loss for the last 3 consecutive years. In order to avoid being delisted, the listed companies have strong motivation to manipulate the earnings. Jiang Yihong (1999) and Lu Jianqiao(1999) carry out profound research on the problem whether the listed companies take the earnings management to avoid it . In the above mentioned paper, Jiang Yihong demonstrates that the listed companies whose EPS are slightly higher than the critical point of profits and loss do have the behavior of earnings management. By taking 22 loss listed companies in Shanghai Stock Exchange as sample and some listed companies in the same industry and with the same scales profits as controlled samples, Lu Jianqiao(1999) adopts four models: (1) The random walk expectation model of accrual profit amount; (2) The accrual profit expectation model in consideration of growth factors; (3) The accrual profit expectation model considering scale and industrial factors; (4) The expand Jones model. These models validate the behavior of earnings management of the loss-making companies from all kinds of viewpoints. The empirical conclusion shows that the loss-making companies conduct the remarkable earnings management of deliberately reducing surplus during the first loss year and intentionally increasing profits before the previous year of the first loss when it turns out profitable. It shows that the listed companies at a loss generally manage their earnings by deducting or adding the revenue in order to avoid the penalty by CSRC. The earnings management is mainly achieved through the adjustment of receivable accounts, among which, the item of operating capital, particularly the items receivable or payable as well as inventory might be the best tools of earnings management.4. Study on earnings management arising from inside dealing and manipulating the stock priceUnder the circumstance that the market attaches much importance to the performance indicators of listed companies, some main force dealers will lobby listed companies to announce the profits higher or lower, according to the strategy of stocking up shares after dropping the stock price or selling stocks in mass after pushing the stock price. And the listed companies also have the strong motivation of earnings management under the drive of mutual benefits. There is no directempirical study to prove this. Notwithstanding, Zhao Yulong and Wang Zhitai (1999) have enlightened us a little. The thesis examines whether the market can identify the permanent surplus elements so as to study if there exists the phenomenon of fixed functions while analyzing the mechanism of formation, with the listed companies at Shanghai Stock Exchange as samples, disintegrating the accounting earnings as permanent and temporary surplus as well as adopting the proposal in terms of information and valuation. The empirical study proves that Chinese stock market cannot identify the actual meaning of the permanent earnings in EPS. The market mechanically reacts to the nominal EPS only, which means the management can blindfold the market by manipulating earnings. As a result, the main player can manipulate and dominate the stock market through disclosing the exaggerated profits with the listed companies.Earnings management is characterized by unexpected accruals in every above-mentioned empirical study. If researchers can successfully apply specific accruals or accounting methods to the study of earnings management, we could directly provide proofs to the rule makers and interpret which areas are effective and which are not and need improving and re-examining by verifying some specific accruals. And furthermore, we could develop a more illustrative accruals model in the field. Anyway, the researches in this field have opened up a vast range of prospects for the future research. Yu Haiyan and Li Zengquan(2001) make some rudimental attempts in the field. They study listed companies behaviors of earnings management through examining the implementation of assets depreciation policies in 1999 among A-shares listed companies in Shanghai Stock Exchange. They take non-financial companies as samples, which were listed in Shanghai Stock Exchange before Jan. 1st, 1999 with the issuance of A-shares and whose accounting policies about extracting bad debt reserves changed in 1999 as samples, and quantitatively analyze the listed companies behaviors of earnings management with the test method of the general difference comparison between the two samples. Thus, the conclusions present that behaviors of earnings management exist among the loss-making listed companies in the course of extracting merchandise depreciation reserves as well as those companies which lie in the critical point of qualification for the rationed share acquisition in the course of extracting bad debt reserves and merchandise depreciation reserves. But change of stockholders has no influence upon the listed companies behaviors of extracting as assets devaluation reserves, and the main factors affecting the companies behaviors of extraction are the companies scale and asset to debt ratio. The study provides the clue to the rule makers that assets depreciation policy needs to be improved.II. Studies on the Degree of Earnings Management andthe Effects of Resources AllocationThe evidences regarding to the degree of the earnings management and the effects of the resources allocation will help the rule makers find the earnings management phenomenon and investors keep off the fake of earnings management. They will also help to test whether the rule makers should issue new accounting standard or add new articles of information disclosure since the effects of earnings management have been so broadly extended. In general, recent Chinese researchers only tested those general measure standards of earnings management, i.e. they carried out studies with accruals as measure standards and took the companies that were expected to have strong motivations of earnings management as samples. However, most of them cannot use evidence to prove whether earnings management is only made by a few or all the listed companies in China, which is still lacking a comprehensive and profound analysis. Sun Zheng and Wang Yuetang (1999) judge whether earnings management exists in listed companies as a whole, taking all the listed companies as samples, adopting statistical analysis system (SAS) to test the statistical distribution of ROE. The empirical study indicates as follows. (1) The test to distribution of ROE of all listed companies shows that the earnings management tendency exists commonly. So accounting information is distorted. (2) According to histogram and more advanced test of ROE, they find that earnings management can represent “rationed share acquisition phenomenon”, “poor profit phenomenon”, and “huge loss phenomenon”. (3) The “poor profit phenomenon” makes the listed companies that should be specially treated have not been specially treated and those who should be delisted have not been delisted. Thus, the result is that market risk rises sharply and resources are used in low or no efficiency. The “rationed share acquisition phenomenon” directly causes the limit added resources in stock market to be dispersed unreasonably. So the validity of added resources allocation is weakened. The “serious loss phenomenon” distorts the information of listed companies performance at various stages and misled investors judgment and strategy, thus weakening the resources allocation of the stock market. (4) The motivation of earnings management is related to the government regulations, especially the policies of special treatment, rationed share acquisition and delisting. This phenomenon indicates that government regulation policy is inefficient. treated have not been specially treated and those whoshould be delisted have not been delisted. Thus, the result is that market risk rises sharply and resources are used in low or no efficiency. The “rationed share acquisition phenomenon” directly causes the limit added resources in stock market to be dispersed unreasonably. So the validity of added resources allocation is weakened. The “serious loss phenomenon” distorts the information of listed companies performance at various stages and misled investors judgment and strategy, thus weakening the resources allocation of the stock market. (4) The motivation of earnings management is related to the government regulations, especially the policies of special treatment, rationed share acquisition and delisting. This phenomenon indicates that government regulation policy is inefficient.The results of research tell us that the wide use of earnings management by the listed companies in China will weaken the resources allocation of the stock market. So, it is necessary to enhance transparency ofaccounting information, to innovate the government regulation policy, and to get rid of unreasonable administrative interference.III. The Enlightenment to the Rule MakersWith regard to the earnings management, different people on behalf of different interest groups have their different conclusions. On the one hand, the information of earnings is the result of many interest group games. Market is also turning to mature for the incessant games. On the other hand, it is the extension of the delicate accounting mechanism, which causes the financial innovative instruments to appear incessantly. Therefore, the appearance of financial innovative instruments advances the accounting. However, excessive earnings management, which will weaken the function of securities markets resources allocation, should be seriously regarded.In China, earnings management, which is a common phenomenon, increases investors cost of searching the true information and markets transaction cost. As a result, the market runs ineffectively. If this situation continues, more investors will choose to use the negative investment strategy. Moreover, the development of stock market might be stagnated. Thus, how to strengthen the rules to optimize the resources allocation in taking accounting of the relativity and truth of the accounting information is a worthy research issue for the regulatory agency. The regulators are facing the dilemma whether they should be more strict or flexible in choosing the scope of accounting methods and stipulating the conditions. On the one hand, emphasis on coherence of the accounting standard will weaken the opportunism of manipulating accounting data, strengthen the regulation of securities and improve the relativity of accounting information among the corporations. However, on the other hand this will make listed companies lose the right to choose accounting standard so that they are in difficulty to supply the investors worthy accounting information. Zhao Yulong and Wang Zhitai (1999) hold that the accounting methods should be various, but the choice of every accounting method and changing condition of accounting policy should be restricted seriously. According to Tang Yunwei and Lu Jianqiaos (1998) opinion, if the advantages brought about by flexible accounting methods with the better accounting information outweigh the disadvantages of the opportunism adopted by the management, there should be more flexibility, otherwise, vice versa.Existing interferences including the rationed share acquisition policy, delisting policy and parameters controlling are not perfect. As a result, the listed companies do not comply with th
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