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Bachelor thesis BSc Thesis Accounting

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INTRODUCTION Somemes the exercise of accounng discreon enables managers to manage prots by shi!ing the revenue or expenses of an accounng period to another accounng period. When this happens, it is reduces the total cost for the year under review and increases the prot; even when income is expected in the future, it may be included in the current year nancial statements. When there is also a sign of loss in the future, sales of the current year can be delayed and included into the next statement. These acons can be referred to as earnings management. Earnings management is associated with the entrenchment e)ect (Weisbach 1988). According to agency theory, managers may take advantage of informaon opacity to make earnings manipulaon possible (Rodríguez-Pérez and Hemmen, 2010). While a large number of studies have invesgated earnings management in listed companies in developed countries, focus has recently shi!ed to China. When we look at China, public ownership companies tends to have stronger incenves to manage earnings for management compensaon, while private ownership companies pay more a9enon to tax expense savings (Carlos, 2008). In a study conducted in China by Chen, Lee, and Li (2008), it was observed that due to the rigid rule-based accounng, the listed rms in china have limited instruments for earnings management. The Chinese board of directors show some di)erences with the developed world due to China’s concentrated ownership structure of listed rms, and the ongoing strong polical and economic connecons between listed rms and the Chinese government (Mancinelli and Ozkan, 2006). Since this divergence between China and developed countries could mean that a larger board has control over the CEO, it raises the queson whether this also lowers the entrenchment e)ect. The research queson derived from this is: Does the board size of Chinese rms in@uence the earnings Read More …

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