Since the 1980s, earnings management has been one of the hot topics studied by scholars at home and abroad. Earnings management has two sides. It has its legal side, but more of it is its harmful side. It provides legal ways to avoid taxes, transfer profits or payments, obtain company control, form market monopolies, diversify or bear investment risks, etc., under the guise of the market, thus misleading investors and ultimately disrupting market resource allocation. Judging from the existing literature, there are many methods of earnings management for listed companies, such as through accounting policy selection, changes in accounting estimates, and related transactions. With the continuous improvement of my country's accounting standards, the space for earnings management through accounting policy selection and changes in accounting estimates has become smaller and smaller, and earnings management through related transactions has become the preferred method for listed companies. According to a 1999 survey conducted by the Securities Times and United Securities, among listed companies' earnings management methods, related transactions accounted for 55.56%, and clever use of accounting policies accounted for 44.44%. As far as the 2000 annual report is concerned, Look, among the 1,018 listed companies, 29 listed companies have achieved considerable one-time transfer income through related transactions, and the company's net profit indicators have greatly improved as a result. It can be seen from this that the phenomenon of earnings management through related transactions of listed companies in my country is quite serious, and studying the earnings management of related transactions of listed companies is undoubtedly of great practical significance.

1. The meaning and characteristics of earnings management of related-party transactions

Related-party transactions refer to the transfer of resources or obligations between related parties, regardless of whether the price is collected c3. Earnings management refers to the behavior of maximizing the operator's own interests or the market value of the enterprise through the selection of accounting policies within the scope permitted by CAAP (Generally Accepted Accounting Principles)'4). Accordingly, the author defines related-party transaction earnings management as: the controlling shareholder of a listed company. In order to mislead users of financial information, management authorities take advantage of the flaws in the existing system and the selection of accounting policies to flexibly circumvent the provisions of the accounting system and pursue their own interests by structuring and disclosing related transactions. Earnings management of related-party transactions in my country has the following characteristics:

(1) Duality of subjects. The management authority of listed companies and their major shareholders (usually the parent company formed by the restructuring of the original state-owned enterprise) are the main entities of earnings management in front of and behind the scenes respectively.

(2) Object diversity. The objects of earnings management of related-party transactions are not limited to tangible assets, but also include equity, debt, profit opportunities, and intangible assets such as patents, proprietary technologies, trademarks, and land use rights. In addition, behaviors (such as providing services, agency, etc.) have also become the objects of earnings management of related party transactions.

(3) Diversification of forms. Listed companies manage earnings from related-party transactions not only through the selection of accounting policies, but also through fictitious related-party transactions and defects in the existing system.

(4) The revenue entities are complicated. In Western earnings management, the main beneficiaries are generally managers, while in my country, the main beneficiaries of earnings management from related-party transactions include not only the management authorities of listed companies, but also major shareholders, government officials and related enterprises of listed companies.

(5) The universality and concealment of existence. Due to various factors such as the irregularity of my country's securities market, imperfect corporate governance structure, and inherent institutional flaws in my country's stock market, earnings management of related-party transactions has penetrated into many enterprises. Earnings management of related party transactions is carried out within related companies and has a certain degree of concealment. It is difficult for outsiders (such as public shareholders of listed companies) to understand the inside story of the transactions. This feature also provides an opportunity for listed companies to use earnings management of related transactions to deceive shareholders and seek improper benefits.

2. Internal motivations for earnings management of related-party transactions of listed companies

(1) Issuance of stocks, including obtaining listing qualifications, allotment of shares and issuance of new shares. Most of my country's listed companies are listed by setting up a joint-stock company by divesting some high-quality assets from the group company. In order to eventually make the listed company a continuous "cash machine" for the group company, major shareholders always find ways to help the company go public before the company is listed, and during the allotment and issuance of new shares, they help at all costs with the allotment and issuance of new shares. The my country Securities Regulatory Commission has strict regulations on the return on net assets of companies that apply for listing, allotment of shares, and issuance of new shares, so that limited and precious funds can flow to high-performance listed companies.

In order to achieve the purpose of listing, allotment of shares and issuance of new shares, some listed companies, with the support or cooperation of major shareholders, will use earnings management of related transactions to adjust the return on net assets, improve the company's operating performance, and "cheat" profits legally and compliantly. Qualifications for listing, rights issue and issuance of new shares. Research by Jiang Yihong, Wei Gang and others also shows that no matter how the China Securities Regulatory Commission modifies the regulations on listing, allotment and issuance of new shares, as long as there is a minimum value requirement, the number of companies around this point will be extremely dense.

(2) Avoid delisting. The "Company Law" stipulates that listed companies that have suffered continuous losses in the past three years should suspend the listing of their stocks. At present, it is very difficult for Chinese companies to get listed. If they are delisted after being listed, it will not only cause great losses to shareholders and listed companies, but also have a great impact on the "performance" of local governments. Therefore, some listed companies would rather make a fuss about their accounting and have their certified public accountants issue a qualified opinion than suffer the fate of being delisted. Relevant research shows that in order to avoid being punished by the securities regulatory authorities for three consecutive years of losses, listed companies obviously abnormally reduce their earnings in the year when they first suffer losses; and in the year when they turn losses into profits, there is an obvious tendency to adjust earnings. Earnings management behavior. Lu Jianqiao's research shows that working capital items, especially receivables and payables, inventory items, etc., may be the most important earnings management tools for listed companies, and working capital can be managed very easily through related transactions.

(3) Tax avoidance. Some scholars have shown that the tax avoidance motivation for earnings management of listed companies in my country is not very strong. However, the author found that listed companies that produce taxable consumer goods have their own controlled or wholly-owned sales companies, and all the taxable consumer goods they produce are sold to the sales company. The real purpose of their transactions is questionable. Because my country's tax law stipulates that consumption tax is an in-price tax, and the taxation link is mainly in the production link, so the sales price (ex-factory price) has a direct impact on the amount of consumption tax. By setting up a sales company (or supply and marketing company), first selling to the sales company at a low price, and then the sales company selling at a high price, you can achieve the purpose of paying less consumption tax. Especially in the liquor industry, due to the high tax rate, the motivation for tax avoidance is very strong. For example, the main business income of a liquor company (parent company) in the first half of 2002 was 1.266 billion yuan, and the consumption tax rate implemented was a compound tax rate of 25% + 0.50 yuan/city, and its consumption tax was approximately 420 million yuan. Since all of its main business income comes from the sales of alcoholic products, the subsidiaries included in its consolidated accounting statements are the supply and marketing company (mainly engaged in the sales of alcoholic products), Printing Co., Ltd. (mainly engaged in packaging and publication printing), and investment consulting Co., Ltd. (mainly engaged in investment activities) and Environmental Protection Industry Co., Ltd. (mainly engaged in the production and sales of industrial steam). Therefore, the main ones that can increase its consolidated main business income are the parent company and its sales company. However, its 2002 semi-annual report showed that its consolidated main business income was approximately 3.46 billion yuan. From this we can judge that the main reason for the obviously high main business income of the real merger is that the main business income of the supply and marketing company is too high, or the external sales price of the sales company is too high. If it does not set up a supply and marketing company, the main business income of the parent company will be 2 to 3 times the current level, and the consumption tax will be 700 to 800 million yuan more. By setting up a supply and marketing company, it can pay 700 to 800 million yuan less. Excise tax.

3. External causes of earnings management of related-party transactions of listed companies

(1) Defects in the company formation model. Most of my country's listed companies were restructured from former state-owned enterprises, and a considerable number of them adopted the model of listing the main body and transforming the original enterprise into a parent company (group company). This kind of "stripping" listing results in the listed company not fully possessing an independent and complete supply, production, sales system and the ability to operate independently directly to the market. There is dependence on related parties in terms of product sales and raw material supply. There must be intricate and even interdependent related relationships and related transactions between it and its parent company before restructuring and other subsidiaries controlled by the parent company, so it is more likely to have earnings management problems with related transactions.

(2) Defects in the listing system.

Due to the late start of my country's securities market, since its establishment, the government has adopted a combination of planning indicators, quota systems and approval systems to solve the issue of enterprise issuance and listing qualification arrangements and queuing issues (on March 17, 2001, the China Securities Regulatory Commission announced the official implementation of stock (Issuance approval system), coupled with the serious "supply and demand bottleneck" in my country's securities market, stock issuance premiums are usually high and the cost of equity funds is relatively low. Raising funds through the stock market can bring excess returns to companies, resulting in listings. Qualification becomes a "shell" resource. In order to obtain listing qualifications, companies will adopt various means to conduct earnings management. Even after listing, the "shell" resource nature of listing qualifications still exists, and the company's refinancing after listing still must comply with the requirements of planning control. Therefore, in order to protect the "shell", listed companies or enterprises to use the "shell" to get listed, make extensive use of related transactions to achieve their goals.

(3) Defects in corporate governance structure. The prominent problem in my country's corporate governance structure is the phenomenon of "one share dominates" state-owned shares. Although my country's state-owned share reduction plan has partially reduced the share of state-owned shares in the equity structure of listed companies, state-owned shares and legal person shares still account for the majority. Due to the high concentration of equity, low liquidity, and the fact that the manager market of listed companies in my country has not yet formed, it is easy to form a situation of "insider control", so that major shareholders basically control the shareholders' meeting, the board of directors, the board of supervisors, and even many The legal representative of the major shareholder also serves as a senior manager. The legal representatives of these major shareholders also serve as senior managers, resulting in greater consistency of interests between the major shareholders of listed companies and the listed companies. Since the financing cost of my country's capital market is inverted and equity capital is lower than the cost of debt capital, major shareholders are willing to support profit packaging of listed companies and distribute dividends and repurchase the assets of major shareholders. Financial transactions, etc. to realize their interests. Therefore, under the conditions of the control of major shareholders, there is almost no restriction on the major shareholders' help in earnings management of listed companies. The earnings management of related transactions of many listed companies is due to the equity composition and formation mechanism.

(4) Defects in the accounting system. As our country's accounting is in a period of integration with international accounting, new standards have been continuously introduced in recent years. The original intention was to curb the earnings management behavior of enterprises, but there were some deficiencies in the actual implementation process, leaving a large space for earnings management. . For example, in order to prevent companies from fabricating profits through related transactions, the "Accounting Standards for Business Enterprises - Disclosure of Related Party Relationships and Transactions" was promulgated. However, subsequent non-monetary transactions including asset swaps and equity transfers and debt restructuring emerged to manipulate profits. . In order to prevent these two types of businesses, the Ministry of Finance issued the "Accounting Standards for Business Enterprises - Non-monetary Transactions" and "Accounting Standards for Business Enterprises - Debt Restructuring" in 1999. However, new transaction methods that can circumvent the constraints of the standards have emerged. That is, "monetization" through non-monetary transactions, etc. In order to prevent listed companies from increasingly using unfair related-party transactions to manipulate profits, the Ministry of Finance urgently promulgated the "Interim Provisions" on December 21, 2001. However, in the recent related-party transactions of listed companies, "related-party transactions" have appeared again. De-correlated”. It can be seen from the evolution of accounting standards for related-party transactions in my country that accounting standards have limitations in constraining earnings management of related-party transactions of listed companies.

4. Main ways and means of earnings management of related-party transactions of listed companies

(1) Non-related transactions. In the existing accounting standards, there is no specific definition of related parties, and only the criteria for judging related parties are given, that is: in corporate financial and operating decision-making, if one party has the ability to directly or indirectly control or agree with If one party controls another party or exerts significant influence on another party, it will be regarded as a related party; if two or more parties are controlled by one party, they will also be regarded as related parties. According to the above standards, if two or more parties are under the same control of one party or are subject to significant influence from one party, the two or more parties are generally not regarded as related parties. This provides room for listed companies to conduct earnings management. Since most of my country's listed companies have a natural connection with their controlling shareholders, group companies, after the implementation of the above-mentioned guidelines and regulations, it is almost unrealistic for the controlling shareholders of listed companies to help listed companies with earnings management. However, "there are policies from above, and there are policies from below." Countermeasures" now include earnings management by several subsidiaries that are significantly influenced by the controlling shareholder, so that related transactions can be non-related and bypass its regulations.

In addition, the standards stipulate that: those who own less than 20% of the equity of an affiliated enterprise are generally not considered related parties. Therefore, before a large amount of related party transactions occur, a listed company can sell the equity of its affiliated enterprise in advance to make its related transactions non-relevant. Relevance. For example, for a geomagnetic card that was issued a non-standard unqualified audit opinion by an accountant, the revenue from the currency detector sold to a high-tech investment company in 2001 reached 224 million yuan, and the sales gross profit was 131 million yuan, accounting for 10% of the listed company's consolidated main business in 2001. 54.56% of the profit. This high-tech investment company was originally a holding subsidiary that held 94% of the equity of the magnetic card. However, after two share transfers in 2001, it no longer held its equity by the end of 2001. Therefore, this huge sale was from a related party. The transaction becomes a non-related transaction.

(2) Related party transactions are complicated. Existing accounting standards stipulate that if a listed company conducts normal product sales to related parties, it shall be handled according to the following circumstances: 1. If the current sales volume to non-related parties accounts for a large proportion of the total sales volume (usually 20% and above), The weighted average price of sales to non-related parties should be used as the basis for measurement of similar transactions between related parties and recognized as revenue; the excess of the actual transaction price recognized as revenue shall be included in the capital reserve. 2. If the sales of goods are limited to the listed company and its related parties, or the sales of goods with non-related parties do not reach a large proportion of the total sales of goods (usually less than 20%), in this case, it should be regarded as Situation handling: If the actual transaction price does not exceed 120% of the book value of the goods, revenue will be recognized based on the actual transaction price: if the actual transaction price exceeds 120% of the book value of the goods sold, revenue will be recognized at 120% of the book value of the goods; if the actual transaction price exceeds The portion recognized as income is included in capital reserve (related variance price). According to the above provisions, listed companies can design a complex related party transaction to achieve the purpose of earnings management. Assume that a group company has five subsidiaries, A, B, C, D, and E, among which A is a listed company. It is assumed that product sales are only between related parties. The group company first sells the goods to B, so B's book value is 120% of the original value. B then sells it to C, and C's book value is the original value. By analogy, when E sells it to When A, A's book value may be several times the original value. Therefore, when A resells the goods to any of its related parties, it can obtain huge profits from it, thus achieving the purpose of increasing its profits. Through reverse operation, it can also achieve the purpose of smoothing profits.

(3) Related party transactions are made invisible. On the surface, there is no relationship between a listed company and another company when it conducts transactions. However, in fact, the two companies are under the leadership of the same administrative department. It is only due to the administrative intervention of the competent department that the listed company has no choice but to enter into transactions with that company. The fairness of the transaction is questionable. In addition, there are also situations where two companies conduct transactions, and on the surface they cannot be found to be related, but in fact they are related transactions. For example, we assume that A is a listed company, B is a subsidiary of A, and C is another external company that has no relationship with A or B. Now A sells goods to C at a price 100% higher than the market price, and C sells the goods to B at the same price. C does not lose anything, but A can sell the goods to its affiliates through C at a markup. , in order to achieve the purpose of increasing its profits. From a formal point of view, A and C, B and C have no relationship, but the transactions between them are essentially related transactions. Although the determination of related party transactions should follow the principle of substance over form, this requires accountants and auditors to conduct in-depth analysis of the enterprise's economic business, understand and have considerable work experience. Under normal circumstances, it is difficult for accountants and auditors to discovered. Coupled with the asymmetry of accounting information, it is even more difficult for outsiders to know the hidden related transactions of listed companies. In addition, my country's accounting standards have few provisions on implicit related transactions, which has led some listed companies to use implicit related transactions to increase profits and whitewash accounting statements, making earnings management of related transactions intensified.

5. Countermeasures to standardize earnings management of related-party transactions of listed companies

(1) Improve the corporate governance structure of listed companies. An important reason for the intensification of earnings management of related-party transactions in my country is the common "one-share-dominated" ownership structure of my country's listed companies, which has brought some disadvantages and negative impacts to the governance structure of China's listed companies.

The only way to change this phenomenon is to achieve a fundamental change in the corporate governance model from administrative to market governance, diversify investment entities and decentralize company equity, and at least enable other shareholders to join forces to compete with major shareholders in terms of voting rights. , to change the situation where listed companies’ interest subjects and governance subjects are too concentrated. In addition, the introduction of independent directors into the boards of directors of listed companies by Western developed countries will help improve the corporate governance structure of listed companies. The China Securities Regulatory Commission issued the "Guiding Opinions on Establishing an Independent Director System in Listed Companies" on August 16, 2001, proposing that listed companies should establish an independent director system, but did not provide details on how independent directors should perform their duties and how they would be punished if they failed to perform. regulations. From the actual implementation point of view, the independent directors of some listed companies have become a decoration and their role has not been well played. Therefore, the independent director system should be continuously improved to give full play to its independence. Consideration can be given to increasing the number of independent directors, especially accounting personnel. In particular, the supervision of independent directors must be strengthened and penalties for failure of independent directors to perform their duties should be introduced as soon as possible.

(2) Change the return on net assets rate as the only core control parameter for listed companies to obtain listing qualifications, issue shares, and issue new shares. As mentioned above, the main purpose of listed companies' earnings management on related-party transactions is to obtain listing qualifications. Allotment of shares and issuance of new shares, and my country's regulations on stock listing, allotment and issuance of new shares all use return on net assets as the only core control parameter. Although this can significantly reduce regulatory costs, it is likely to induce listed companies to make a fuss about using related-party transactions to increase return on net assets, increasing investment risks and information costs in the market. Therefore, the qualifications for listed companies to obtain listing should be changed. The allotment of shares and the issuance of new shares take the return on net assets as the only core control parameter, and establish a comprehensive economic indicator system including monetary indicators, physical indicators, financial indicators and non-financial indicators to comprehensively assess the performance and operating quality of listed companies and encourage listings The company takes into account both microeconomic and macroeconomic benefits, as well as economic and social benefits in production and operations, and plays a role model for listed companies in establishing a modern enterprise system.

(3) Further improve related party relationships and transaction standards. The criteria for judging related party relationships should be based on international accounting standards and the principle of substance over form. At the same time, the characteristics of my country's listed companies should be fully considered and a set of relatively flexible and highly operable pricing policies for related party transactions should be formulated. , and standardize the disclosure of pricing policies for related party transactions. For major related transactions, the independent directors should hire an asset appraisal agency to evaluate the assets involved in the related transactions, and disclose the fair market price and the difference between the pricing of the related transactions and the fair market price, so that external information users can judge their Reasonability of related party transactions.

(4) Standardize the behavior of intermediaries and play their supervisory role. First, increase the intensity of auditing of related-party transactions by certified public accountants. Relevant departments should issue audit standards or audit guidelines for related-party transactions as soon as possible, and certified public accountants should also pay attention to major related-party transactions of listed companies, especially companies with low profits or companies with huge losses. For transactions that have a significant impact on the financial status and operating results of listed companies, CPAs should analyze whether they are unfair related transactions and issue fair audit opinions to improve the transparency and credibility of related transactions. Secondly, in the asset appraisal process, asset appraisers are required to issue objective and fair results to eliminate arbitrariness in the process. In short, regulatory authorities should effectively supervise the professional quality of intermediaries, standardize their competitive behavior, and improve their quality level, so that they can effectively prevent the consequences of improper related transactions from this link.

(5) Strengthen the supervision and punishment of earnings management of related-party transactions. Compared with developed countries and regions, the external environment of listed companies in my country is relatively severe but the supervision of companies is relatively loose. The existing laws and regulations have less supervision and punishment on related transactions, which makes it easier for listed companies to conduct earnings management. Space is provided. Moreover, the current related transactions of listed companies have become more hidden. Due to information asymmetry, the probability of a listed company using related transactions for earnings management to be audited is very small, and the benefits it can obtain are so huge, so listed companies are more likely to be audited. Be willing to take risks and use related party transactions for earnings management. If our country strengthens the supervision and punishment of earnings management of related party transactions, it will have to consider the consequences when conducting earnings management of related party transactions.

In addition, if controlling shareholders use their control rights to manipulate related transactions without corresponding sanctions, they will be more inclined to infringe on the interests of the company and cause damage to the interests of small and medium-sized shareholders. Therefore, an investor protection law should be established and improved as soon as possible, and a civil compensation system should be established to increase the cost of earnings management, reduce earnings management of related transactions, and further protect the interests of investors.

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