An empirical research on the preference in earning management methods of listed companies with meager profit

This paper selected a sample of A-shares in Shanghai and Shenzhen Stock Exchanges whose ROE fall in the range of 0%-1% (namely listed companies with meager profit) during the three years of 2004-2006. Based on the multiple linear regression method, and studying the profit structure of listed companies with meager profit, this paper confirmed that listed companies with meager profit do have preference in choosing earnings management methods, and the most favorite way for listed companies with meager profit to manage earnings is to take advantage of the net non-operating income. These results provide important implications for investors and the securities regulatory authorities to judge earnings quality of listed companies with meager profit correctly.