Legal Investor Protection and Earnings Management——Based on Manipulations of Accruals and Real Activities

Abstract

Abstract: Will the strengthening of legal investor protection strengthen inhibit enterprises' earnings management? This paper investigates both the accrual and real-based earning management activities based on a sample of the listed firms in China. But the two models reach totally different conclusions, i.e. legal investor protection has a negative impact on accruals manipulation, but has a positive impact on real earnings management. Further study finds that it is mainly to promote the state-controlled firms' real earnings management, but has no significant impact on the non-state-controlled firms' real earnings management. This finding expands the research of legal investor protection and enterprises' earnings management, and also provides some reference for the improvement of legal investor protection and the reform of state-controlled firms.

Key words: state-owned controlling, non-state-owned controlling, legal investor protection, accrual-based earnings management, real earnings management

Li Zengfu, Zeng Min. Legal Investor Protection and Earnings Management——Based on Manipulations of Accruals and Real Activities[J]. , 2017, 29(2): 221-233.

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