Research on the Effect on Tax Burden of Earning Management Based on Lipschitz Theory

Abstract

Abstract-Based on the features of Chinese market and Chinese institution, this paper intends to study the relationship between earnings management and tax burden by using the account error correction data. As is revealed in the study, the fundamental goal of the earnings management in the listed companies is to allegedly inflate earnings. However, the majority of the companies won't pay the extra taxes and instead, they decrease tax reporting. Little tax restrictions have been attached to the accounting earnings, Therefore tax reduction may be attributed to the way rather than the goal of earnings management. The implication of the phenomena is that analysis on book-tax differences may be the useful tool for supervisors to investigate the earnings management behaviour, for investors and CPA to appraise the quality of accounting information, and for tax sections to supervise the tax report.

Earning Management: Analysis of Non-Banking Firms Listed in Nairobi Securities Exchange using Beneish M-Score and Altman Z-Score.

“…Ali et al (2015) undertook a study to establish the impact of firm's size on earning management in Pakistan, the study concluded that there was positive connection between the firm's size and earning management due to undue pressure from the investors and financial analysts to present favourable earnings. The study by Lu (2017) found that 73.9% of all sampled companies were involved in earning management by inflating their incomes. The quality of audit has been found to have a positive and significant effect on earning management as per the study by Sari and Sari (2019) undertaken in Indonesia.…”