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Research on Earnings Management in Listed Companies

In: Business and Management

Submitted By hinatalj
Words 4264
Pages 18
Research on Earnings Management in Listed Companies

Name: Jing LI

Table of Contents 1.Overview of earnings management theories 3 2.Motivations for earnings management in listed companies 7 3. Means to do earnings management 12 4.Conclusion 17

1.Overview of earnings management theories
1.1 Meaning of Earnings Management
To research on earnings management, we must understand the meaning of earnings management. In financial accounting theory, different researchers have different understandings of the meaning of the earnings management.
First, researchers mainly hold three opinions: First one is that earnings management is due to a keen interest of managers on the choice of accounting policies. Mangers will choose those accounting policies that maximize their own utility or market value of the company. Meanwhile, the accounting policy will not exceed the scope of the accounting standards. The second one is based on the information concept. In this view, earnings management is the concept of a "disclosure management", or to say that the management of the company (including the board of directors, managers, department heads) for certain private interests to control financial statements when disclosing. The third one is from the objectives of standard-setters. Earnings management is that the authorities use professional judgment to prepare financial statements and through the planning transaction to mislead the stakeholders’ decision on the financial statements or influence the contract consequences based on the results of financial statements.
By this analysis, earnings management is to the extent permitted by accounting standards and company law, the company's management team adjust the reported earnings to the desired level by using the accounting choices or achieve the desired level of earnings by...

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