Earnings Management Motivation and Cost Stickiness—Research Based on Private Equity Placement - American Journal of Industrial and Business Management

AJIBM > Vol.8 No.3, March 2018

Earnings Management Motivation and Cost Stickiness—Research Based on Private Equity Placement ()

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DOI: 10.4236/ajibm.2018.83039 1,270 Downloads 3,141 Views Citations

Author(s)

Yihuan Li

Affiliation(s)

Accounting Department, Management School, Jinan University, Guangzhou, China.

ABSTRACT

Cost Stickiness means that costs increase more rapidly with an activity increase than they decrease with an activity decrease. This paper focuses 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.

KEYWORDS

Private Equity Placement, Earnings Management Motivation, Cost Stickiness, State-Owned Enterprises, Big Four International Audit Firms

Share and Cite:

Li, Y. (2018) Earnings Management Motivation and Cost Stickiness—Research Based on Private Equity Placement. American Journal of Industrial and Business Management, 8, 597-606. doi: 10.4236/ajibm.2018.83039.

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