外文翻译--试论在中国通过资产减值转回的盈余管理的激励机制.doc

(完整word)外文翻译-试论在中国通过资产减值转回的盈余管理的激励机制外文翻译-试论在中国通过资产减值转回的盈余管理的激励机制 本科毕业论文设计外 文 翻 译外文题目 Discussion of Regulatory Incentives for Earnings Management through Asset Impairment Reversals in China 外文出处 Journal of Accounting Auditing Finance外文作者 Edward J Riedl 原文Discussion of Regulatory Incentives for Earnings Management through Asset Impairment Reversals in ChinaShimin Chen Yuetang Wang and Ziye Zhao 2009 examine motivations for managers of Chineselisted firms to report asset impairment reversals The study documents that the report of such reversals reflects incentives to avoid delisting from Chinese stock exchanges and those stronger monitoring mechanisms attenuate this opportunistic reporting The study exploits a unique feature of financial reporting within China which allows large sample investigation of impairment reversals I discuss the studys strengths note some limitations on the analyses and inferences and suggest recommendations for future research1 IntroductionShimin Chen Yuetang Wang and Ziye Zhao hereafter CWZ examine motivations for managers of Chinese-listed firms to report asset impairment reversals The primary results suggest that the reporting of such reversals reflects incentives to avoid delisting from Chinese stock exchange Additional analyses reveal that stronger monitoring mechanisms attenuate this opportunistic reporting The study exploits a unique feature of financial reporting within China which allows large sample investigation of impairment reversals Below I discuss the manuscripts strengths note some limitations on the analyses and inferences and suggest recommendations for future research2 Strengths21 Unique Accrual and SettingA broad prior literature examines special items typically defined to encompass nonrecurring or transitory income statement reporting items The most common examples include asset impairments restructuring charges and gains or losses on sales of assets with papers focusing on the economic determinants and reporting incentives for managers to report special items as well as the latters associations with market measures eg Bartov 1993 Elliott and Hanna 1996 Francis Hanna and Vincent 1996 Burgstahler Jiambalvo and Shevlin 2002 Riedl 2004 CWZ adds to this literature by examining an uncommon accrual the reversal of asset impairments Firms ability to report this type of accrual is fairly unique to the Chinese setting Such reversals are generally prohibited under US Generally Accepted Accounting Principles GAAP are allowed in certain circumstances but infrequently reported under the relevant international accounting standards and have been allowed under certain domestic accounting standards eg revaluations within Australia though typically reported directly to equity and thus without any associated effect on net income As a result prior research has examined only limited circumstances of reversals of prior accruals focusing on reversals of restructuring charges Moehrle 2002 and asset revaluations eg Easton Eddey and Harris 1993 Furthermore the fact that the CWZ study is set in China reflects the general manufacturing base and thus high level of reported tangible assets of the broad economy thus affording a substantial number of observations and power to conduct the analyses22 Clearly Defined Regulatory IncentivesCWZ exploits the explicit and welldefined regulatory incentives that listed Chinese firms face to avoid reporting losses Specifically the study highlights that firms reporting two successive years of accounting losses receive a particular designation on the ticker symbol that denotes the risk of delisting reporting three successive years of losses leads to delisting While prior research provides some evidence consistent with US firms being less likely to report impairments to avoid delisting eg Beatty and Weber 2006 the thresholds are specific to particular stock exchanges and less clearly defined Furthermore because the United States generally prohibits firms from reversing impairments the link between the observed reporting choice and regulatory incentive must be inferred from the absence of a reported impairment In some contrast the current setting allows a strong coupling between a clearly defined regulatory incentive delisting due to a string of reported losses and an observed income-increasing accrual with substantial discretion the impairment reversal 23 Key Constructs Subject to Lower Measurement ErrorPrior research examining special items typically employs extensive handcollection of data from earnings announcements annual reports footnotes and other source doucuments1 Furthermore the presentation of special items is not well defined in the accounting standards leading to large variation in the level of detail and disclosure eg disclosure by larger versus smaller firms Thus prior studies of special items bear the burden of potentially noisy measurement in the experimental construct In the setting of CWZ Chinese GAAP requires tabular presentation of any impairment reversals As a result this affords an unusual opportunity to reduce measurement error arising from hand-collection and coding of data2Compustat began providing decomposed categories of special items eg writeoffs restructuring charges as of 2002 previously special items were available electronically only in aggregate form Thus hand-collection of data primarily affects studies with sample periods preceding 2002The measurement error alluded to in this paragraph is the coding of the data by the researcher This is distinct from any measurement error arising by the reporting firm management due to error in the estimation of the observed economic event as well as potential bias in the reporting of the amount3 Limitations31 Regulators Assumed to be Nave UsersThe results of CWZ suggest that firms are more likely to undertake impairment reversals when there are incentives to avoid delisting What is unclear is the role of Chinese regulators in evaluating reported numbers to assess delisting requirements Specifically do regulators review reported amounts or simply accept reported numbers as given Do they have the facility to detect likely manipulation Do they impose penalties for clear violations of the delisting requirements Overall to what degree to assume that regulators are nave users of accounting information accepting figures as reported This seems particularly at odds with the relative high transparency of the impairment reversals under investigation eg owing to the required tabular reporting format as well as many of the reversals relating to relatively easy to value short-term assets see Section 33 This suggests that regulators can easily ascertain instances in which this accrual moves firms from violation to nonviolation owing to a clearly defined threshold negative earnings see Section 22 Thus we are left wondering what the real evaluative capacity is for regulators in this setting and whether this accrual is an effective mechanism that allows managers to avoid this contracting costIt is possible however that managers of the sample firms simply perceive that regulators with some probability will neither detect nor pursue adjustments to these accruals regardless of regulators actual detection or enforcement capabilities If managers were behaving in this manner this would likely manifest in firms reporting impairment reversals to avoid delisting as observed in the current study but also in some subset of firms having the reversals subsequently disallowed by regulators and potentially delisted as a result I discuss this possibility in Section 432 What Are the Explicit Costs to DelistingWhile delisting would intuitively seem to be a costly outcome for a given firm the current study is less clear on identifying and exploiting what the specific costs may be First it is unclear that substantial hurdles exist for firms shares to be relisted Related prior literature has not established in this setting that firms previously delisted face substantial incremental costs eg higher costs of capital upon reentry into the capital markets Second the manuscript would benefit from insights into the economic reasons managers of these firms wish to avoid delisting Such reasons could vary across firms and could provide an additional venue for examination For example do certain firms require additional capital whether to fund growth or maintain operations and thus avoid delisting to allow subsequent stock issuances Do the owners of certain firms attempt to cash out their holdings and thus avoid delisting to allow subsequent disposal of shares Are there expectations of litigation costs arising from shareholder lawsuits due to delisting Further evidence on these reasons would provide more explicit links on the motivations to report this accrual to avoid delisting33 Reconciling the Reversals to the Nature of the AssetsCWZ provides detail on the distribution of assets for which impairment reversals are reported see Table 2 It is interesting that a substantial portion of the sample reversals are for assets typically defined as short-term assets3 This raises two issues First assuming that the impairments were reported in the previous fiscal cycle potentially the prior year and because such assets should by definition be converted into cash during the ensuing year it appears odd that impairments for these particular assets could be reversed with values added back to the balance sheet as unrealized reversals in the current year That is how do these assets remain categorized as shortterm assets Second and more important these types of assets are far more likely to have observable market values owing to their shorter term and likely more liquid nature If managers were employing noneconomic accruals such as impairment reversals to avoid delisting it seems that the use of impairment reversals for these types of asset would be highly suspect and easily verifiable by regulatory authorities Thus to the extent the results derive from the subsample of observations relating to short-term assets further understanding this process would help to assess the nature of the reported reversals in this sample as well as regulators capacity to oversee figures reported to them3 Per Table 2 of the 1157 firm-years reporting unrealized impairment reversals 469 are for bad-debt provision 326 are for short-term investments and 420 are for inventory note these are not additive are firms may report reversals across multiple categories in a given year 4 Future ResearchCWZ raise a number of additional issues that can likely be exploited in this setting The first concerns the role of the regulator as part of the institutional framework This could be an interesting setting in which to investigate learning effects that may occur coincident with movement to a different set of accounting standards including whether the regulators become more adept at examining and challenging reported accruals such as these impairment reversals over time Related evidence could include the extent to which firms are penalized for improper reversals or required to undue reported reversals that are determined to lack economic content This would tie in well with CWZs results those certain monitoring mechanismsparticularly independent directors auditors and crosslistingappear to reduce opportunistic reporting This could provide insights into the broad shift in financial reporting regimes worldwide as countries move to adopt International Financial Reporting Standards potentially with a limited institutional framework to enforce such standards eg Ball 1995 2005 CWZ also provide evidence of the context in which managers are likely to report these impairment reversals As discussed above a useful avenue of future research would explicitly identify reasons that managers view delisting as a costly event This could include examining the explicit costs to delisting such as by focusing on the subset of delisted firms This could also include the specific benefits achieved by avoiding delisting such as subsequent stock issuance or sales of shares by executives This would provide more conclusive evidence on the suggestive results in the current manuscriptFinally future research could attempt to assess external users perceptions of the costs and benefits to this manipulation In particular if Chineselisted firms reporting impairment reversals avoid a costly delisting event equity investors may view this positively as the firms avoidance of a costly contracting outcome Research could examine how creditors view these types of reversals including for debt covenants5 ConclusionOverall CWZ examine an interesting setting linking a unique accrual to a welldefined regulatory incentive The fact that managers appear likely to report impairment reversals to avoid delisting adds to our understanding of the incentives leading to earnings management as well as the specific mechanisms by which managers use financial reporting to avoid costly contracting outcomes Future research can provide further insights into this areaREFERENCESBall R 1995 Making Accounting More International How and How Far Will It Go Journal of Applied Corporate Finance 8 1929Ball R 2008 What is the Actual Economic Role of Financial Reporting Accounting Horizons 22 427432Bartov E 1993 The Timing of Asset Sales and Earnings Manipulation The Accounting Review 68 840855Beatty A and J Weber 2006 Accounting Discretion in Fair Value Estimates An Examination of SFAS 142 Goodwill Impairments Journal of Accounting Research 44 257288 Burgstahler D J Jiambalvo and T Shevlin 2002 Do Stock Prices Fully Reflect the Implications of Special Items for Future Earnings Journal of Accounting Research 40 585612Chen S Y Wang and Z Zhao 2009 Evidence of Asset Impairment Reversals from China Economic Reality or Earnings Management Journal of Accounting Auditing and Finance forthcoming Easton P D P H Eddey and T S Harris 1993 An Investigation of Revaluations of Tangible Longlived Assets Journal of Accounting Research 31 3 138 Elliot J A and J D Hanna 1996 Repeated Accounting WriteOffs and the Information Content of Earnings Journal of Accounting Research 34 Supplement 135155Francis J D Hanna and L Vincent 1996 Causes and Effects of Discretionary Asset WriteoffsJournal of Accounting Research 34 3 117134Moehrle S R 2002 Do Firms Use Restructuring Charge Reversals to Meet Earnings TargetsThe Accounting Review 77 2 397413Riedl E 2004 An Examination of LongLived Asset Impairments The Accounting Review 79 3 823852Riedl E and S Srinivasan 2008 Signaling Firm Performance Through Financial Statement Presentation An Analysis Using Special Items Working Paper Harvard Business SchoolFrom Journal of Accou