The effect of classification shifting on accruals and cash flow

Abstract

In recent years, with the development of the economy, scholars have found that earnings managements are widespread in Chinese market. However, the classification shifting earnings management has been found in developed market and Chinese scholars did not do many researches in this field and the understanding is still limited, especially the effect of classification shifting on accruals and cash flow has not been study yet. Therefore, we use Chinese A-share listed companies to test the classification shifting existing and the impact of the earnings quality from accruals and cash flow that can be the index for the affections. Through the empirical results, we can know classification shifting is confusing to investors and the reaction of accruals may be lower in market to make the stock price mispricing in coming years. In a word, this paper fill in the blank of the research of classification shifting, and call the regulators and investors' concerns of classification shifting earnings management in corporations.