关联交易下的盈余管理【外文翻译】

外文文献翻译

Earnings Management through Affiliated Transactions Prior research has primarily tested for earnings management under the premise that the discretion allowed in recording accruals gives rise to earnings management behavior (Healy and Wahlen 1999). These studies have found evidence consistent with managers using discretionary accruals to report earnings in accordance with certain managerial incentives (e.g., avoid losses, maintain an earnings trend, meet analysts' forecasts, maximize bonuses, avoid debt covenants,minimize political costs, increase offering price, etc.).' We extend prior research by focusing on an additional source of earnings management. Besides accrual manipulations, firms may also engage in earnings management through transactions with affiliated companies. That is, instead of relying on

the judgment afforded by generally accepted accounting principles in recording accruals, a dominant company may use its influential relationship over an affiliated company to structure transactions between the two companies in a way that allows profits to be shifted from the affiliate to the dominant company. The dominant company reports higher profits and the affiliate reports lower profits, while the profitability of the economic entity as a whole remains unaffected. Since the value of the dominant company is directly linked to the profitability and well being of the entire economic entity, this type of earnings management may cause users of the dominant company's financial statements to be misled.

There are several potential ways that companies could manage earnings using transactions with affiliated companies. Firms may engage in channel stuffing by forcing distributors to purchase higher than normal inventory levels, thus increasing the manufacturer's sales and profits for the current period. Firms could also manage earnings using transactions with less than wholly owned subsidiaries. Suppose a parent company sells inventory to a less than wholly owned subsidiary, which then sells the inventory to an external party in the same period. The increase in

consolidated earnings occurs because lower profits are shifted to minority shareholders. Firms may also manage earnings using affiliated transactions by either shifting profits across different tax jurisdictions (Emshwiller and Smith 2002), or using influence over suppliers (Butters 2001). Data on the effects of affiliated transactions, because of their very nature, are difficult to obtain.

Transactions between the parent company and affiliates can affect the individual earnings of the companies within the group, but consolidated earnings remain generally unaffected. For example, the parent company can sell assets (e.g., inventory, land, etc.) to its subsidiary. The amount of the sale, as well as the timing of the sale, can be influenced by the parent due to its dominant position over the subsidiary. The parent company can report the sale and increased earnings in the current period. For consolidated purposes, the affiliated transaction will be eliminated and not affect the financial statements. The parent company could also enhance its earnings by shifting additional operating costs to subsidiaries. Total operating costs would be included in the consolidated reports but not in the parent's. The parent's significant influence over the subsidiary's dividend policy represents another method by which the parent company could improve parent earnings with no corresponding affect to consolidated earnings. Subsidiary-to-parent dividends increase parent earnings under the cost method, but these are excluded from consolidated earnings. The Japanese reporting environment allows for a pure match (i.e., same company) between parent and consolidated earnings. For each company, we can compare earnings management for stand-alone parent earnings plus affiliated transactions to earnings management for consolidated earnings excluding affiliated transactions.

Consistent with prior research based on U.S. firms (e.g., Burgstahler and Dichev 1997; Degeorge et al. 1999; Payne and Robb 2000; Beatty et al. 2002; Beaver et al. 2003), both parent and consolidated earnings in Japan are managed at three important earnings thresholds: avoiding losses, avoiding earnings declines, and avoiding negative forecast errors. Consistent with expectations based on the ability to use affiliated transactions, parent earnings show greater evidence of earnings management than do consolidated earnings at each of these three earnings thresholds. Additional