The impact of the Chinese stimulus program on earnings management
International Journal of Accounting & Information Management
ISSN: 1834-7649
Article publication date: 7 October 2019
Abstract
Purpose
The purpose of this paper is to investigate the impacts of the 2008 Chinese stimulus program on earnings management.
Design/methodology/approach
Using a sample period from 2004 to 2011 (per-stimulus period: 2004-2007 and post-stimulus period: 2008-2011), the authors compare the change in earnings management between the firms that received the stimulus funds and those that did not receive the stimulus funds.
Findings
The authors find that from the pre- to post-stimulus period, the recipient firms experienced a greater increase in downward accrual management and a greater decrease in real management than the non-recipient firms did. This result is primarily driven by the non-state-owned enterprises and firms using non-Big-Four auditors.
Originality/value
The results suggest that the earnings management level is ultimately determined by the underlying economic and political factors influencing managers’ and auditors’ incentives (Cohen, 2008; Ball et al., 2003). Meanwhile, some mechanisms, such as high-quality audit (Eshleman and Guo, 2014) and state ownership (Wang and Yung, 2011) can also play a role in determining the level of earnings management.
Keywords
Citation
Hao, Q., Shi, X., Bu, D. and Li, L. (2019), "The impact of the Chinese stimulus program on earnings management", International Journal of Accounting & Information Management, Vol. 27 No. 4, pp. 653-670. https://doi.org/10.1108/IJAIM-11-2018-0134
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited