Trade-off between Income Tax Costs and Financial Reporting Costs: based on Accruals and Real Activities' Earnings Management

• 1、Business School, Huaqiao University, Quanzhou 362021

Abstract：Based on the relative stable environment of the company income tax law from 2008 to 2012, the paper does research on the listed company's earnings management behaviour with the incentives of income tax costs and financial reporting costs. The results suggest that, within the conditions of relative stable environment of the company income tax law, listed companies widely manage their earnings in applying both accruals and real activities earnings management strategies; and take account for income tax costs, showing earnings management behaviour for tax avoidance; and trade-off the income tax costs and financial reporting costs in both accruals and real activities strategies, what's more, the companies show more tendency to real activities earnings management strategy on the trade-off. The research would be beneficial to enrich the earnings management literature and provide some inspiration to the practice such as audit and the government regulation.

Keywords： Accruals earnings management Real activities earnings management Income tax costs Financial reporting costs