Translated Abstract
Earnings management behaviors of listed companies are not conducive to enhancing the quality of accounting information, and also may hinder the healthy development of capital market. The previous literatures focused on accrual-based earnings management, and ignored the real earnings management. From the perspective of accounting flexibility, this paper explores the ways of choosing earnings management of listed companies and its impact on financial performance. Based on the summary and analysis of relevant theories, this paper builds a theoretical research model of accounting flexibility, accrual-based earnings management, real earnings management and financial performance. Taking listed companies in China as research objects, and using statistical analysis as method, this model is examined. The empirical results show that the proposed model has been proved basically, and most hypotheses have been verified. There is a significant impact of accounting flexibility on earnings management choices, accrual-based earnings management and real earnings management color current earnings, but real earnings management impair future financial performance.This study achieves the desired research objectives, and has its significance to deepen and expand earnings management research.
Compared with existing earnings management research, the innovative work of this paper is mainly reflected in the following areas:
First, this paper builds a relational model between choice of earnings management based on accounting flexible and its impact on the financial performance. Earnings management research is always an important issue in theoretical research area, however, previous studies limited to concern about accrual-based earnings management, ignored the real earnings management. Through this model, we not only study the impact of accounting flexibility on earnings management choices of listed companies systematically, but also reveal in detail about the impact of accrual-based earnings management and real earnings management of listed companies on their current and future financial performance. To certain extent, this study makes up for the deficiencies of previous studies, changes the situation of separately study of accrual-based earnings management and real earnings management enriches and expands the content of earnings management .
Second, this paper discovers and proves the impact of accounting flexibility on real earnings management of listed companies. Existing research often focus on the motivation of remain non-negative profit, and uses real earnings management behaviors of micro-profit companies as proofs of existence of real earnings management. This study compares the different degrees of real earnings management under different levels of accounting flexibility, and finds that companies with lower level of accounting flexibility may have higher degree of real earnings management. Then it is concluded that companies with lower level of accounting flexibility are more prefer to real earnings management. This conclusion does not only reveal a new proof for the existence of real earnings management in listed companies, but also provide a new approach and methodology for identifying real earnings management.
Third, this paper enhances the accuracy of measurement of accrual-based earnings management and sale manipulation. When measuring the degree of accrual-based earnings management, existing researches are usually based on the assumption that cash flow from operating activities will not be manipulated, and completely ignore the impact of sales manipulation on the cash flow from operating activities. This paper takes into account of these effects and uses the regression value of cash flow from operating activities as basis to measure the degree of accrual-based earnings management, which not only make up the existing studies, but also correct the existing conclusion that accrual-based earnings management and sales manipulation be a positive relationship. In addition, the existing research models are generated from the sales process, and they do not take into account of the fixed cost. This study takes the generating process of cash flow from operating activities as basis, builds an estimation model of cash flow from operating activities to measure the extent of sales manipulation, which improves the explanatory power of this model.
Fourth, this paper has proved that the real earnings management behaviors of listed companies are detrimental to the company‘s future financial performance and have serious economic consequences. Existing studies mainly reveal the impact of accrual-based earnings management on the company‘s financial performance, which focus on initial public offering of shares or equity refinancing, but do not consider the corresponding content of real earnings management. In this study, accrual–based earnings management and real earnings management are both included. When analyzing the impact of real earnings management on company‘s current and future financial performance, the effect of accrual-based earnings management is controlled, which not only improve the reliability of conclusions, but also demonstrate the serious economic consequences from real earnings management behaviors
Translated Keyword
[Accounting flexibilityAccrual-based earnings managementReal earnings managementFinancial performance]
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