Research ArticleOpen AccessGoogle Scholar indexed
Earnings Management Motivation and Cost Stickiness—Research Based on Private Equity Placement
Accounting Department, Management School, Jinan University, Guangzhou, China
- 1 Accounting Department, Management School, Jinan University, Guangzhou, China
American Journal of Industrial and Business Management·Volume 08 (2018)·Pages 597–606·Published 8 March 2018·DOI10.4236/ajibm.2018.83039
Copy link · social · email
Abstract
Cost Stickiness means that costs increase more rapidly with an activity increase than they decrease with an activity decrease. This paper focus es on Chinese A-shares listed companies, which implement private equity placement from 2007 to 2016, to study the impact of earnings management motivation of private equity placement on listed companies’ cost stickiness. The results show that the listed companies implementing private equity placement have positive motivation of earnings management, and will cut more costs when the operating income declines, thus weakening their cost stickiness. Further tests find that this weakened effect is more obvious in the state-owned enterprises, and less obvious in the enterprises audited by the big-four.
KeywordsPrivate Equity PlacementEarnings Management MotivationCost StickinessState-Owned EnterprisesBig Four International Audit Firms
- Anderson, M.A., Banker, R.D. and Janakiraman, S. (2003) Are Selling, General, and Administrative Costs “Sticky”? Journal of Accounting Research, 41, 47-63. https://doi.org/10.1111/1475-679X.00095
- Teoh, S.H., Welch, I. and Wong, T.J. (1998) Earnings Management and the Underperformance of Seasoned Equity Offerings. Journal of Financial Economics, 50, 63-100. https://doi.org/10.1016/S0304-405X(98)00032-4
- Rangan, S. (1998) Earnings Management and the Performance of Seasoned Equity Offerings. Journal of Financial Economics, 50, 101-122. https://doi.org/10.1016/S0304-405X(98)00033-6
- Chen, X.Y., Xiao, X. and Guo, X.Y. (2000) Equity Rights and Profit Control of Listed Companies. Economic Research, No. 1, 30-36.
- Zheng, Q. (2009) Research on the Earnings Management of Private Placement Company. Journal of Shanghai Finance University, No. 3, 53-58.
- Zhang, W.D. (2010) Private Placement and Earnings Management—Empirical Evidence from China’s Securities Market. Management World, No. 1, 54-63+73.
- Li, Z.F., Huang, H.L. and Lian, Y.J. (2012) Private Placement, Earnings Management and Corporate Performance Decline—Research Based on Accidental Manipulation and Real Activity Manipulation. Journal of Applied Statistics And Management, 5, 941-950.
- Kama, I. and Weiss, D. (2013) Do Earnings Targets and Managerial Incentives Affect Sticky Costs? Journal of Accounting Research, 51, 201-224. https://doi.org/10.1111/j.1475-679X.2012.00471.x
- Dierynck, B., Landsman, W.R. and Renders, A. (2012) Do Managerial Incentives drive Cost Behavior? Evidence about the Role of the Zero Earnings Benchmark for Labor Cost Behavior in Belgian Private Firms. The Accounting Review, 87, 1219-1246. https://doi.org/10.2308/accr-50153
- Jiang, W., Hu, Y.M. and Lu, Z. (2015) Does Accrual-Based Earnings Management Affect Firm Cost Stickiness. Nankai Business Review, 2, 83-91.
- Liu, Y.Z., Zhang, D.L. and Tang, D.P. (2013) Market Degree, Political Linkage and Earnings Management—An Empirical Study based on Private Listed Companies in Shenzhen Small and Medium Enterprises. Audit and Economy Research, 28, 49-58.
- Yu, M.G. and Pan, H.B. (2008) Political Relationship System Environment and Private Enterprise Bank Loans. Management World, 8, 9-21+39+187.
- Yang, X., Tian, G.L., Si, Y. and Fonseka, M.M. (2016) The Nature of Ownership, Corporate Political Relations and Private Placement—Empirical Analysis Based on Chinese Listed Companies. Nankai Business Review, 19, 34-141+154.