Substitution, availability and preferences in earnings management: empirical evidence from China

Szczesny, Andrea; Lenk, A.; Huang, Ting Chiao

doi:10.1007/s11846-008-0018-x

Cited by 12 publications

(7 citation statements)

References 40 publications

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“…Real activities manipulation refers to practices that deviate from normal operations, intending to misdirect some stakeholders into having faith in the firm's achievements of certain financial objectives during normal businesses (Roychowdhury, 2006). Szczesny et al (2008) discovered that the REM activities of Chinese companies facing risks of missing the regulatory performance threshold are dramatically higher. After adopting International Financial Reporting Standards (IFRS) in 2006, Chinese public companies have manipulated real activities that are not easily detectable and undercensored to achieve upward earnings management (Ho et al, 2015).…”

Section: Earnings Management In Firms Other Than Family Enterprises I...mentioning

confidence: 99%

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

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COVID-19 and earnings management: a comparison between Chinese family and non-family enterprises

Rahman

Ding

Hossain

et al. 2022

JFBM

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PurposeThe main objective of this study is to examine the impact of the COVID-19 pandemic on earnings management practices in China using a sample of family and non-family enterprises. More specifically, this study aims to examine whether the COVID-19 pandemic causes variation in Chinese listed family and non-family enterprises' operations, as reflected in the level of real earnings management (REM).Design/methodology/approachThis study uses three standardised REM indicators, namely, the abnormal level of cash flows from operations, the abnormal level of production costs and the abnormal level of discretionary expenses. Ordinary least squares (OLS) regressions are applied to compare the earnings management of Chinese family and non-family enterprises during the pre-pandemic period (2017–2019) and the pandemic period (2020).Findings The authors find that Chinese listed non-family enterprises tend to participate in more REM activities than family enterprises before the COVID-19 outbreak. However, the opposite is true during the pandemic. The authors also find that COVID-19 has increased the involvement of family and non-family enterprises in REM activities.Originality/valueThe results of previous studies based on REM using Chinese listed firms may not be applicable under the new social background of COVID-19. As the period after the COVID-19 outbreak is relatively recent, Chinese researchers have yet to study it comprehensively. The present study is amongst the first empirical attempts investigating the effect of a pandemic financial reporting by investigating whether and how the burst of the COVID-19 crisis affected financial reporting through the earnings management practices of listed Chinese family and non-family enterprises. Such information is crucial because it can provide analysis for all stakeholders to make better decisions.

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Section: Earnings Management In Firms Other Than Family Enterprises I...mentioning

confidence: 99%

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

COVID-19 and earnings management: a comparison between Chinese family and non-family enterprises

Rahman

Ding

Hossain

et al. 2022

JFBM

View full text Add to dashboard Cite

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“…In the last two decades, a rising number of research projects dealing with strategy and the fundamental factors to stakeholder involvement in organisational decision making have been published (Asher et al, 2005). Diverse studies point to the utilisation of Stakeholder Theory in contemporary A model for stakeholder classification organisational contexts (Freeman and Liedtka, 1997;Metcalfe, 1998;Baron, 2001;Clarke, 2005;Baron and Diermeier, 2007;Desai, 2008;Lo et al, 2008;Szczesny et al, 2008;Harrison et al, 2010).…”

Section: Stakeholder Theorymentioning

confidence: 99%

A model for stakeholder classification and stakeholder relationships

Mainardes

Alves

Raposo

2012

Management Decision

166

118

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Purpose -This paper aims to develop a new model of stakeholder classification and a model for explaining the relationship between the organization and its respective stakeholders. Design/methodology/approach -The new proposed model is based on an empirical study that comprises an exploratory study based on 15 interviews and a confirmatory study based on 684 questionnaires answered by staff of 11 public universities. The main variable deployed is the stakeholder's respective level of influence from the organization's management perspective, that is, their level of legitimacy, power and urgency. Findings -The new model proposes six stakeholder types (regulator, controller, partner, passive, dependent and non-stakeholder). To explain the relationship between the stakeholder and the organization, the traditional needs-satisfaction vision was expanded. The variables of relevance, mutual influence and participation were found to be important in explaining the organization and stakeholder relationship. This study contributes both in simplifying stakeholder classification and in explaining the relationships between parties.Research limitations/implications -The study proposes a new model for stakeholder classification based on empirical research carried out with public organizations, therefore it is advisable to test this new classification scheme with other types of organizations. Originality/value -This research proposes a stakeholder classification scheme previously unpublished in the literature, which helps organizations managing the relationships with their stakeholders.

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“…A strand of empirical literature documents the pervasiveness of earnings management practices in China to meet certain profit thresholds required by the CSRC for Initial Public Offering (IPO), and rights issues (Aharony et al, 2010;Chen, Chen, & Su, 2001;Chen & Yuan, 2004;Chen, Lee, & Li, 2008;Haw, Qi, Wu, & Wu, 2005;Szczesny, Lenk, & Huang, 2008;Yu et al, 2006) and to avoid delisting (Chen et al, 2001;Jiang & Wang, 2008). Wang, Chen, Lin and Wu (2008) examine the frequencies and magnitudes of earnings management under two different thresholds, zero earnings and prior earnings, in the Chinese market from 1997 to 2004 and report that earnings management is higher when firms try to avoid losses than when firms try to report earnings increase.…”

Section: Incentives For Earnings Management In Chinamentioning

confidence: 99%

Split-share reform and earnings management: Evidence from China

Jiang

Habib

2012

Advances in Accounting

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This paper investigates the impact of split share structure reform on earnings management in China. A unique institutional feature of China was the coexistence of two types of share that endowed all shareholders with equal voting and cash flow rights but different tradability. This split share structure significantly constrained the tradability of shares that led the Chinese Securities Regulatory Commission to make it mandatory for the conversion of non-tradable shares into tradable shares from 2006 onwards. We investigate whether such a conversion has any effect on information quality through reduced earnings manipulation. We specifically examine the incentives for earnings management during the reform-transition period. A unique feature of the split share reform has been the requirement for non-tradable share holders to compensate the tradable share holders. We argue that the rational response from the non-tradable share holders would be to pay a lower consideration to tradable share holders by portraying favorable picture through income-increasing earnings management. We also test for the effect of increase in tradable shares on earnings management during the reform transition and post-reform period.

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Substitution, availability and preferences in earnings management: empirical evidence from China

Abstract: Real earnings management, Accounting earnings management, Regulatory incentives, China Securities Regulatory Commission, M41 Accounting, G28 Government Policy and Regulation,

Cited by 12 publications

References 40 publications

COVID-19 and earnings management: a comparison between Chinese family and non-family enterprises

COVID-19 and earnings management: a comparison between Chinese family and non-family enterprises

A model for stakeholder classification and stakeholder relationships

Split-share reform and earnings management: Evidence from China

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