Financial statements are
the essential tools reflected the financial activities and performance of
companies. It is an important way to determine investment decisions for numbers
of investors. The most concerned problem of a financial statement for investor
and manager in a company is earning management that affect the “true”
performance of a company and financial reporting transparency.
China plays a great part in the harmonization with accounting
standards. The economics of China reform since 1988 and financial reporting
system convergence gradually to IFRS. There was a change of accounting
regulation in China in year of 2007 as the accounting policy adopted a new set of accounting standards that substantially
convergent with IFRS for chosen companies. The new accounting standards were majority
adopted from IFRS and act as an important part in China’s steps towards
globalization of financial reporting.
(Ding & Su 2008)
However, harmonizing and
converging accounting standards in China with IFRS in emerging capital markets, may not improve the quality of the domestic accounting standards in emerging capital markets by the
factors such as risk, earnings persistence, growth, size,
ownership structure, trading volume, and industry. (Wu, Li & Lin 2014)
This study will look
at the period from 2006 to 2016 since China accounting standards convergence
started from 2007 from numbers of China listed companies. We can understand the
period of China harmonization with accounting standards and post-IFRS convergence
in China as well as the impact of IFRS conversion recent years.
The study can benefit
for investors and managers to understand further of earning management with the
factors that affect the decision of financial statement whether it clearly
illustrates the true performance of a company or not. The data of 2016 is the
most recent data that can use for this study, to find out the factors affecting
the earning management.