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The Impacts of the System of the Disclosure Evaluation of the ShenZhen Stock Exchange on Earnings Management

Author: ChenYan
Tutor: XieShengWen
School: Jiangxi University of Finance
Course: Accounting
Keywords: System of the disclosure evaluation of the Shenzhen Stock Exchange Earnings management Asymmetric information
CLC: F275
Type: Master's thesis
Year: 2010
Downloads: 278
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Abstract

In recent years, countries in the world and international organizations have attached great importance to sound corporate governance, domestic relevant departments are also actively establish and improve the mechanisms of corporate governance, internal succession of corrupt practices of listed companies, but also contributed to the relevant departments to establish and improve the pace and determination of corporate governance. So the establishment of sound corporate governance is the root of the quality of information disclosure, and improves the quality of information disclosure is sound corporate governance, the inevitable result. Many corporate governance evaluation system, Such as the Standard & Poor and Credit Lyonnais Securities, put the company’s disclosure or the quality of information disclosure in the main evaluation object, so that there is a close relationship between quality of information disclosure and corporate governance. Effective information disclosure system is the strong protection to develop securities markets. Increased disclosure of listed company financial condition, operating results, corporate governance, and company of the potential risks and prospects of development of the company can reduce the information asymmetry, reduce the resulting investment risks, allowing rational selection and monitoring of effective investor market company to reduce monitoring costs, improve supervision efficiency.Improving the quality of information disclosure is an important source to establish a sound corporate governance, Since 2001, the Shenzhen Stock Exchange evaluate the domestic listed companies’quality of information disclosure, and encourage businesses to voluntarily disclose more information and to strengthen the public’s attention and supervision, to improve the the efficiency of corporate governance. This paper discusses the problem is that whether the implement of the evaluation of the information disclosure system of Shenzhen Stock Exchange is effective really; whether it could reduce earnings management? And explore whether the evaluation system can distinguish the different earnings management effectively?A lot of literatures of the earnings management have shown that the higher the quality of information disclosure, the smaller motivation to manage earnings management. They think that when the company disclose the higher the quality of information, the proceeds to the less earnings management, the more disclosure of information, the more able to restrict their poor earnings management space. Therefore, in theory, if mandatory require companies to disclose more information, should be able to reduce company earnings management behavior. This research purpose to explore the implement of the information disclosure evaluation system of Shenzhen Stock Exchange, it can urge companies to better self-supervision, to effectively inhibit the earnings management behavior of human manipulation. Also this paper explores and analyzes whether the rating scale of the system with high ratings and in the lower level of earnings management behavior is different.In this paper, we put forward assumption based on the theory and literature of asymmetric information, then build the multiple regression model, and analyze the changes before and after the earnings management, using the annual appraisal system of the Shenzhen Stock Exchange rating DAta, and study on the rating results of the impact of earnings management overall and sub-annual. The results show that in 2001 the implementation of system of the disclosure evaluation of the Shenzhen Stock Exchange, the company was asked to disclose more information, so the extent of earnings management can be reduced effectively in 2002 and 2003. Overall, the results of the system of the disclosure evaluation and earnings management were significantly negatively correlated, indicating that the higher the evaluation level, the lower level of earnings management, that the better the quality of accounting information disclosure of companies, the lower level of earnings management, this article also on the Shenzhen Stock Exchange the annual return of evaluation DAta, found that from 2001 to 2006, except in 2001 did not pass the test of significance, the other years have passed test of significance, indicating that the higher the evaluation level, the lower level of earnings management, that company the better the quality of accounting information disclosure of companies, the lower level of earnings management.The paper makes discoursing in the order of theory to the practice, which consists of five parts:Chapter one is the foreword, which has introduced the background of the selected title of this paper, proposed the meaning of the selected topic, at the same time introduced the relevant concepts, and proposed the research frame of this paper. Chapter two is a retrospect of the relevant references, which mainly include internal and external references about the influence of information disclosure quality to earnings management. The third chapter is about theoretical analysis and assumptions; on the perspective of information economics, this article get the conclusion that reducing the information asymmetry can reduce adverse selection of the management, which support the following research theoretically, by using the agency theory, the signaling theory and the management of opportunistic. Chapter four is about empirical analysis. Firstly, this chapter has made a detailed introduction on the selection of sample companies, the descriptive statistics of the samples, and the design of regression equation and the selection of variables. Then through using the tool of SPSS13.0 according to the proposed model, the author has done the empirical analysis on data of the 456 sample companies, verified the assumptions, and given some possible explanations. Chapter five is the conclusion. In this chapter, on the base of summarizing the main conclusions, the author has made some advices about how to improve the quality of the disclosed accounting information in our country, finally described the weakness of this article and the direction of future research.

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