Will the Change from Four to Three Classifications of Financial Assets Lead to a Substitution of Accrual Earnings Management for Real Earnings Management?
This paper investigates the substitution between accrual earnings management and real earnings management of listed companies after the change from four to three classifications of financial assets in China. This paper divides the financial data of A + H listed companies in China into two groups for the period of 2015-2020, considering the implementation of the Financial Instruments Standard as the time point, and investigates the impact of the change from four to three classifications of financial assets on the earnings management of financial assets of listed companies through OLS regression analysis and suest test. The results of the study show that after the change from four to three classifications of financial assets, the manipulation of financial asset classifications and derecognition of financial assets by listed companies decreased, and the manipulation of fair value measurement of financial assets increased; at the same time, the proportion of financial assets at fair value through profit or loss held by listed companies was significantly and positively related to the level of accrual earnings management.
References
[1]
Badertscher, B. A. (2011). Overvaluation and the Choice of Alternative Earnings Management Mechanisms. The Accounting Review, 86, 1491-1518. https://doi.org/10.2308/accr-10092
[2]
Cai, C., Zhu, R., He, H., & Xie, L. F. (2012). Earnings Management Approach Choices, Behavioral Implicitization, and Improvement of Dying Firms’ Condition-Empirical Evidence from A-Share Special Treatment Companies. Accounting Research, No. 9, 31-39+96.
[3]
Cang, Y. T., Chu, Y. Y., & Qi, Z. (2011). External Constraint Monitoring and Spatial Transformation of Corporate Behavior: Reflections Arising from the Subprime Mortgage Crisis. Management World, No. 6, 91-104.
[4]
Cleary, S. (1999). The Relationship between Firm Investment and Financial Status. Journal of Finance, 54, 673-692. https://doi.org/10.1111/0022-1082.00121
[5]
Dai, D. M., Mao, X. S., & Deng, P. (2005). A Study of Asset Impairment Provisioning Behavior of Loss-Making Listed Companies in China. Financial Research, No. 7, 71-82.
[6]
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting Earnings Management. Accounting Review, 70, 193-225.
[7]
Dong, M., & Zhang, X. (2009). Historical Cost or Fair-Value Accounting: Analysis of the Reclassification of Unrealized Holding Gains and Losses for Marketable Securities. University of Lausanne and University of California.
[8]
Ge, J. S. (2009). Exploring Accounting Choice Issues—Fair Value-Oriented Measurement Choices. Contemporary Accounting Review, 2, 8-17.
[9]
Gong, Q. H., Wu, L. S., & Wang, Y. P. (2015). Partial Substitution between Two Types of Earnings Management. Economic Research, 50, 175-188+192.
[10]
Li, C. Y., Zhang, Y., Li, X. B., & Liang, S. K. (2018). Earnings Management under Fair Value: Crisis under smooth Profit—A Listed Company A as an Example. Accounting and Economic Research, 32, 46-61.
[11]
Li, Z. F., Zheng, Y. H., & Lian Y. J. (2011). Equity Refinancing, Earnings Management and Performance Slippage of Listed Companies: A Study Based on the Manipulation of Accruals and Real Activities. China Management Science, 19, 49-56.
[12]
Lian, Y. J., & Liao, J. P. (2017). How to Test the Difference of Coefficients between Groups after Group Regression? Journal of Zhengzhou Institute of Aviation Industry Management, 35, 97-109.
[13]
Lian, Y. J., Su, Z., & Ding, Z. G. (2008). Can Cash-Cash Flow Sensitivity Test the Financing Constraint Hypothesis? Statistical Research, 25, 92-99.
[14]
Mao, Z. H., & Xu, C. (2018). Can Fair Value Hierarchy Measurement of Financial Assets Identify Earnings Management? An Empirical Study Based on Non-Financial Listed Companies in China. Economic Science, No. 4, 117-128.
[15]
Shilo, L. (2002). The Effect of SFAS 115 on Earnings Management in the Banking Industry. The Journal of Applied Business Research, 18.
[16]
Song, C. J., Thomas, W. B., & Yi, H. (2010). Value Relevance of FAS No. 157 Fair Value Hierarchy Information and the Impact of Corporate Governance Mechanisms. The Accounting Review, 85, 1375-1410. https://doi.org/10.2308/accr.2010.85.4.1375
[17]
Sun, M. L., Jiang, Y. X., & Mao, S. S. (2010). A Study on the Determinants of Financial Asset Classifications—Whether Managers’ Intention Is the True and Only Criterion. Accounting Research, No. 7, 27-31+95.
[18]
Ye, J. F., Zhou, L., Li, D. M., & Guo, L. (2009). Management Motivation, Accounting Policy Choice and Earnings Management: An Empirical Study Based on the Classification of Financial Assets of Listed Companies under the New Accounting Standards. Accounting Research, No. 3, 25-30+94.
[19]
Yuan, X. Y., & Jie, M. H. (2016). Research on the Choice of Corporate Earnings Management Methods Based on the Perspective of Cost-Benefit Theory. Macroeconomic Research, No. 8, 84-96.
[20]
Zang, A. Y. (2012). Evidence on the Trade-Off between Real Activities Manipulation and Accrual-Based Earnings Management. The Accounting Review, 87, 675-703. https://doi.org/10.2308/accr-10196
[21]
Zhao, C. G. (2006). Asset Impairment and Surplus Management: Policy Implications of the “Impairment of Assets” Standard. Accounting Research, No. 3, 11-17+96.
