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Emerald Emerging Markets Case Studies

ISSN: 2045-0621

Online from: 2011

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A “Big Bath” in China: accounting and corporate governance

Document Information:
Title:A “Big Bath” in China: accounting and corporate governance
Author(s):Mingchuan Ren (Associate Professor at the School of Management, Fudan University, Shanghai, China)
Citation:Mingchuan Ren, "A “Big Bath” in China: accounting and corporate governance", Emerald Emerald Emerging Markets Case Studies, (2011)
Keywords:Accounting, Accounting practices, China, Corporate governance
Article type:Case study
DOI:10.1108/20450621111110663 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Acknowledgements:Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision making. The author/s may have disguised names; financial and other recognizable information to protect confidentiality.

Subject area – Accounting, corporate governance, business ethics.

Study level/applicability – MBA and EMBA.

Case overview – China has largely changed its accounting practice in line with international norms. But its corporate governance structure continued to be administratively driven. Many Chinese-listed companies, especially big ones, are transformed from state-owned enterprises, with the government as their largest shareholder. It is no exception to Company C. Then what is the common pattern of accounting behaviour in China? An insight could be drawn by analysing this case.

Expected learning outcomes – Highlight two issues in point, namely accounting issue and governance issue. Chinese companies are now allowed to choose their accounting policies, while their top decisions are subject to government policies. Identify Company C's creative accounting by discussing China's accounting reform. In this regard, China has been relatively robust in terms of dropping its own practice and adopting western one. Discuss the corporate governance issues unveiled. What are company's performance criteria? Are they clearly established and enforced? And what about government's decision to change CEO twice in less than one year? What are the impacts on CEO's behaviour?

Supplementary materials – Teaching note.

Icon: Teaching notes.

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