An Empirical Study on Internal Control and Earnings Management of China’s Listed Companies Based on the Modified Jones Model

DOI

10.2991/meess-18.2018.44How to use a DOI?

Keywords

Internal control, earnings management, modified Jones model.

Abstract

One of the key issues in the study of internal control (IC) is whether IC can effectively constrain earnings management (EM) of listed companies. By using a sample of 425 companies listed in Shenzhen Stock Exchange 2013-2015, and employing the modified Jones model, this paper explores the effects of IC on EM in listed companies in China. The results show that there is a significant negative correlation between IC levels and EM levels, and the high quality internal control can reduce earnings management by both accounting choices and real activities. The study also finds that listed companies mainly manipulate earnings through financial indicators of operating income growth and asset-liability ratio, and IC weakness such as the disclosure of inaccurate and untrue financial information will lead to the occurrence of financial frauds.

Copyright

© 2018, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Download article (PDF)

TY  - CONF
AU  - Yaohong Chen
AU  - Jiming Li
AU  - Yujia Wang
PY  - 2018/08
DA  - 2018/08
TI  - An Empirical Study on Internal Control and Earnings Management of China’s Listed Companies Based on the Modified Jones Model
BT  - Proceedings of the 2018 International Conference on Management, Economics, Education and Social Sciences (MEESS 2018)
PB  - Atlantis Press
SP  - 234
EP  - 238
SN  - 2352-5398
UR  - https://doi.org/10.2991/meess-18.2018.44
DO  - 10.2991/meess-18.2018.44
ID  - Chen2018/08
ER  -