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Is the Cash Flow Managed?
--An Empirical Evidence from Quarterly Financial Reports of Chinese Listed Firms
Shuang Xue,
Shanghai University of Finance and Economics
Xiang Cai,
Hong Guo,
ABSTRACT. Most of literatures on accounting manipulation focus on earnings management and less efforts has been put on cash flow manipulation. We use the data of Chinese A-share firms during 2003-2004 to investigate the cash flow management. We develop a new method to measure the discretionary cash flow and find that the firms with a lower cash flow from operation than earnings at the end of the third quarter tend increase the cash flow in the fourth quarter or vice versa. Both the amount and the quality of earnings are examined by China Securities Regulation Commission when applying to issue equity. So the. reversal effect is much more significant in the candidates of SEO. Our research support the motivation of CFO management is to avoiding or meeting the government regulations.
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