This paper builds a government reputation-interfered game model based on the KMRW reputation model framework . The behavior of fraudulent reporting is analyzed from a three-participant game perspective including government , listed companies and investors . This paper shows that the game between investors and listed companies essentially becomes a three-participant game in which the probability that investors will invest in a listed company is dependent on the outcome of the game between government and listed companies . As the government's regulation policies are issued in advance , the expected income of listed companies is a function of disclosure , so the regulation policy decides the disclosure of balanced performance . When the listed companies disclose a favorable balance , deviating from the true performance , they tend to use the false reputation gained from the government's reputation to disclose false information characterized by″earnings manipulation″and″low-profit phenomenon″. According to these findings , we suggest that regulators should realize the″caveat emptor″market-oriented regulation on the basis of a solid market micro-infrastructure .