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Private information and investment-q sensitivity: Evidence from new products China Journal of Accounting Research Pub Date : 2024-02-29 Ganbing Li, Kai Zhu
This study shows that a decline in investment efficiency due to information asymmetry may not necessarily devalue a firm but may enhance its value instead. Firms base their investment decisions on both public and private information. However, effectively transmitting private information to investors in a competitive market is quite challenging, as it leads to stock prices inadequately reflecting a
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How do board features and auditor characteristics shape key audit matters disclosures? Evidence from emerging economies China Journal of Accounting Research Pub Date : 2023-11-11 Md Mustafizur Rahaman, Md. Rezaul Karim
This study examines how corporate board features and auditor characteristics in Bangladesh influence the disclosure of key audit matters (KAM) in annual reports from 2018 to 2021. Using ordinary least squares (OLS) regressions, the study finds that factors such as chair gender, the presence of women on the board, audit committee (AC) size, auditor tenure, and client-auditor relationship significantly
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Partial portfolio disclosure, investors’ attention, and window dressing China Journal of Accounting Research Pub Date : 2023-09-25 Shujian Guo
I show that the disclosure of mutual funds’ holdings significantly affects investors’ investment decisions. As most mutual fund websites, advertisements, and fund-trading platforms only disclose a fund’s 10 largest holdings (top-10), this study finds that investors disproportionately focus on these stocks. However, this bias does not lead to additional profit because relative to their peers, funds
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Market manipulation by rumormongers: Evidence from insiders’ stock selling China Journal of Accounting Research Pub Date : 2023-08-16 Yan Tan, Wenting Zhang, Xiangting Kong
Using a large sample of data on insiders’ stock selling and rumors about A-share listed companies in China, this study empirically tests whether and how rumors about companies are used to manipulate the market in the context of insiders’ stock selling. We find that the probability of a rumor’s occurrence, especially that of a favorable rumor, significantly increases in the 30 days before the first
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Stakeholder demands and corporate social responsibility: Evidence from the Olympic Games China Journal of Accounting Research Pub Date : 2023-04-28 Trung K. Do, Henry Hongren Huang, Liwei Shan, Albert Tsang, Li Yu
We propose that stakeholder demand can explain firms’ corporate social responsibility (CSR) activities and empirically test our proposition using 2002–2016 panel data from multiple countries. We select the Olympic Games as our experimental context and use a difference-in-differences design. We find that firms domiciled in countries that host the Olympic Games subsequently experience a significantly
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Government social media and corporate tax avoidance China Journal of Accounting Research Pub Date : 2023-03-31 Qi Jiang, Yanli Chen, Tianjun Sun
With the advent of the new media era, government social media have become an important paradigm for social governance. We perform a large-sample regression and reveal that the higher the quality of taxation bureaus’ operation of government social media, the lower the degree of local enterprises’ tax avoidance, which works through reducing tax avoidance incentives and increasing the difficulty of committing
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The state capital investing and operating company pilot reform and SOE bailouts China Journal of Accounting Research Pub Date : 2023-03-23 Chuyi Wu, Liping Xu, Yu Xin
This paper explores the influence of the State Capital Investing and Operating Company (SCIOC) pilot reform on SOE bailout using a staggered difference-in-differences model. Based on a sample of listed SOEs during 2011–2018, we find that when the real controllers of listed SOEs enter the list of SCIOCs, soft budget constraints are alleviated and listed subsidiaries are less likely to become distressed
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Mandatory information disclosure and innovation: Evidence from the disclosure of operational information China Journal of Accounting Research Pub Date : 2023-02-28 Jinyang Liu, Kangtao Ye, Yurou Liu
We use a quasi-natural experiment wherein the Shanghai Stock Exchange requires listed companies in certain industries to disclose operational information and a staggered difference-in-differences model to examine the impact of mandatory information disclosure on corporate innovation. We find that companies subject to mandatory operational information disclosure show significantly increased innovation
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Religiosity and bank earnings management: Revisiting international evidence China Journal of Accounting Research Pub Date : 2023-02-11 Tanzina Akhter, Abul Kalam Azad
The modernization theory forecasts a sharp declining effect of institutionalized religion on human behavior owing to the extensive economic development. However, this prediction is rejected and proved that religious values and beliefs have a pervasive influence on individual conduct. Based on this salient evidence, we examine the influence of religious social norms on bank earnings management behavior
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Confucian culture and the external pay gap China Journal of Accounting Research Pub Date : 2023-02-11 Weimin Xie, Jialu Guo, Hengxin Zhang
We examine the impact of Confucian philosophy on external pay gaps, and find that a Confucianist atmosphere is negatively associated with firms’ external pay gaps for both executives and employees. Mechanistically, the Confucian concept of “righteousness” reduces the self-interested motivation of management, in turn reducing executives’ external pay gap; “humaneness” causes management to focus on protecting
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Can differences in the background characteristics of the chairperson–CEO vertical dyad reduce management agency costs?—A perspective Based on the internal configuration of the top management team China Journal of Accounting Research Pub Date : 2023-02-04 Qianhua Lei, Jingchang Li, Yaheng Zhong, Yujia Huang
We test whether differences in the background characteristics of firms’ chairperson and CEO can reduce management agency costs. We find that when the chairperson is older, has a higher level of education, and has more overseas experience than the CEO, the management agency costs will be lower. A series of robustness tests do not change our conclusions. In further analysis, we find that the negative
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Confucian culture and corporate bond pricing China Journal of Accounting Research Pub Date : 2022-12-10 Lingling Zhai, Xudong Tang
We investigate the effect of Confucian culture on corporate bond pricing. Using the birthplace data of 56,759 Jinshi in the Ming and Qing dynasties to construct a proxy of Confucian culture, we find a significantly negative relation between Confucian culture and bond pricing: the stronger the Confucian atmosphere of the corporate headquarters’ location, the higher the bond rating and the lower the
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Starts and refutations of the Covid-19 rumors: Evidence from the reaction of the stock market China Journal of Accounting Research Pub Date : 2022-10-28 Zhe Li, Zixi Ling, Jian Sun, Congjie Yun
By manually collecting data on Internet-based rumors concerning COVID-19, we investigate the market reactions to the spread of such rumors and the government’s refutation of them. We find that frightening (reassuring) rumors have a negative (positive) impact on investors. The refutation of frightening rumors triggers a positive market response, whereas the refutation of reassuring rumors does not cause
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Standardization of the strategy translation process, procedural fairness in budgeting and firm performance China Journal of Accounting Research Pub Date : 2022-07-21 Wenxuan Duan, Hezun Li, Jian Sun, Guang Yang
This paper studies the effect of the standardization of the strategy translation process on procedural fairness in budgeting and firm performance. Analysis of 250 valid questionnaires using a structural equation model shows that the strategy translation process (STP) affects firm performance not only directly but also indirectly, through budget participation and procedural fairness in budgeting. This
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Does an abnormal change in deferred tax assets interfere with analysts’ earnings forecasts? China Journal of Accounting Research Pub Date : 2022-07-21 Yujia Xue
In 2007, China adopted the single balance sheet liability method for tax accounting, but its shortcomings have emerged. I sample A-share listed companies from 2007 to 2018 to study whether an abnormal change in deferred tax assets interferes with analysts’ earnings forecasts and find that an abnormal change in deferred tax assets increases the error and divergence of these forecasts. Compared with
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Do companies compare employees’ salaries? Evidence from stated-owned enterprise group China Journal of Accounting Research Pub Date : 2022-06-21 Chuang Lu, Yuhao Niu
The mechanism by which enterprises set salaries is vitally important to employees and is especially relevant to the reform of state-owned enterprises (SOEs). This paper investigates the effect of comparing employee compensation based on a sample of A-share SOE groups from 2008 to 2018. We find that when employee compensation at one company sharply increases, the employee compensation of other companies
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Stock index adjustments and analysts’ forecast optimism: A quasi-natural experiment on the CSI 300 Index China Journal of Accounting Research Pub Date : 2022-05-24 Shangkun Liang, Huaigu Cui, Chun Yuan
As stock index adjustments comprise a basic system of capital market, their potential influence on analysts’ earnings forecasts is worthy of research. Based on a research sample of 23 adjustments to the CSI 300 Index from June 2007 to June 2018 and the backup stocks announced during the same period, this study examines the impact of additions to stock index on analysts’ forecast optimism using a staggered
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Thinking of peace when rich: The effect of industry growth on corporate risk-taking China Journal of Accounting Research Pub Date : 2022-04-29 Xiangting Kong, Jinsong Tan, Jingxin Zhang
We investigate the unique role and mechanisms of industry growth in firms’ risk-taking policies. We find that industry growth is negatively associated with corporate risk-taking, consistent with the prospect theory that a high-growth industry gives firms a superior external environment, which may cause them to refrain from corporate risk-taking as in the saying “thinking of peace when rich.” This correlation
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Loan loss provisions and return predictability: A dynamic perspective China Journal of Accounting Research Pub Date : 2022-03-10 Phoebe Gao, Chu Yeong Lim, Xiumei Liu, Cheng Colin Zeng
This paper examines the impact of loan loss provisions (LLPs) on return predictability during 1994–2017. We find that on average, LLPs are negatively associated with one year ahead stock returns. This effect is particularly significant during the global financial crisis but much weaker during the Basel II and III periods. Consistent with these findings, a long–short trading strategy based on LLPs generates
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Tax credit rating and corporate innovation decisions China Journal of Accounting Research Pub Date : 2022-01-29 Xuehang Yu, Junxiong Fang
The tax credit rating mechanism was formally implemented in 2014. As an important tax collection and management innovation, it has attracted the attention of regulatory authorities and scholars. Different from the literature that directly examines corporate tax compliance, we focus on the impact of tax credit rating implementation on corporate research and development (R&D) investment decisions. Using
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Linguistic specificity and stock price synchronicity China Journal of Accounting Research Pub Date : 2022-01-05 Wei Zhao, Hanfang Yang, Hua Zhou
Linguistic specificity effectively reduces barriers to information cognition, increasing the efficiency of information acquisition, integration and processing. Combining the psycholinguistics theory of the concreteness effect with asset-pricing theory, we determine that linguistic specificity in the management discussion and analysis section of a firm’s annual reports is negatively associated with
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The role of accounting conservatism in M&A target selection China Journal of Accounting Research Pub Date : 2021-10-23 Qingquan Tang, Jingjing Guo, Zhihong Huang
Mergers and acquisitions (M&As) are among the most important investment activities for companies, but they contain great risks. We investigate the role of accounting conservatism in M&A target selection and risk. We find that for risk-averse reasons, firms with high accounting conservatism are likely to acquire profitable targets and avoid loss-making targets. When such firms acquire loss-making targets
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External regulation, independent director attendance, and governance effects China Journal of Accounting Research Pub Date : 2021-03-25 Leilei Song, Gary Gang Tian, Guanmin Liao
In this study we examine how the regulation of director attendance disciplines directors’ behavior, and consider the governance effect of such regulations. This examination exploits the differences between the requirements for director attendance at board meetings enacted by the Shanghai Stock Exchange (SHSE) and by the Shenzhen Stock Exchange (SZSE). Using a difference-in-differences model with a
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CEO organizational identification and firm cash holdings China Journal of Accounting Research Pub Date : 2021-05-01 Meihua Zhou, Jian Cao, Bin Lin
As the decision-makers and implementers of a firm’s financial strategy, executives play a critical role in cash holding activities, and their psychological characteristics have a major impact on cash holdings. This paper investigates the association between CEO organizational identification and firm cash holdings. The empirical results show that CEO organizational identification is negatively associated
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Board secretary and market information efficiency: Evidence from corporate site visits China Journal of Accounting Research Pub Date : 2021-02-22 Weihang Xu, Huijuan Cao, Shuai Qin, Xiangting Kong
Using the setting of corporate site visits, this study examines the information interpretation role of board secretaries on market information efficiency. We find that the presence of the board secretary during corporate site visits can significantly improve the information content of such visits. From the perspective of information interpretation ability, when the board secretary has a dual role,
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Can information confusion caused by the financing model of new economy companies be eliminated? China Journal of Accounting Research Pub Date : 2021-01-21 Xuejing Xie, Weiguo Zhang
New economy companies often use convertible and redeemable preferred shares with equity and debt characteristics as financing tools to reduce risk during their early stages of growth. According to relevant accounting standards, such preferred shares should be classified as financial liabilities and measured at fair value, with changes in fair value recognized in profit or loss. This can lead to confusing
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Fifty years of capital markets research in accounting: Achievements so far and opportunities ahead China Journal of Accounting Research Pub Date : 2020-09-01 Ilia D. Dichev
Abstract This paper reviews the literature on capital markets research in accounting over the last 50 years. Rather than trying to be comprehensive, the review focuses on selected areas, and strives to be forward-looking. The first major takeaway is that the literature has made great progress, especially on the technical side. The second takeaway is that great opportunities remain, especially in using
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Economic sharing of honors: Equal or Exclusive? China Journal of Accounting Research Pub Date : 2020-09-01 Bofu Deng, Jiawei Liu, Li Ji
Abstract The objective of this study is to examine whether and how non-financial performances, specifically the awards achieved by the corporates, are associated with the distribution of the compensation of the managers and other employees within the corporations. Through an investigation of the correlation between corporate awards and compensation, we find that corporate awards as collective honors
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Related party transactions and firm value: The moderating role of corporate social responsibility reporting China Journal of Accounting Research Pub Date : 2020-06-01 Tifanny Dwijaya Hendratama, Zuni Barokah
Abstract This study investigates the influence of related party transactions (RPTs) on firm value. Further, it examines whether a firm’s corporate social responsibility (CSR) reporting reflects its corporate values and ethical concerns, therefore mitigating the value-destroying effects of RPTs. Based on 274 observations from publicly listed firms in Indonesia, our results show that RPTs (i.e., related
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Of stars and galaxies – Co-authorship network and research China Journal of Accounting Research Pub Date : 2020-03-01 Xiaoli Hu, Oliver Zhen Li, Sha Pei
Abstract We examine the association between network centrality and research using the accounting research community setting. We establish co-authorship network using papers published in the five top accounting journals from 1980 to 2016. We find that the co-authorship network in accounting is a “small world” with some most connected authors playing a key role in connecting others. We use machine learning
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Peer effect in the initial recognition of goodwill China Journal of Accounting Research Pub Date : 2020-03-01 Liping Xu, Yueqin Guan, Zhihong Fu, Yu Xin
Abstract This study investigates the peer effect in the initial recognition of goodwill. We find that firms imitate their peers in the initial recognition of goodwill. The higher the tendency for imitation, the higher the proportion of goodwill recognized. Imitation behavior in the initial recognition of goodwill cannot be explained by information acquisition or rivalry motivations. Instead, we find
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Pledgee competition, strategic disclosure, and future crash risk China Journal of Accounting Research Pub Date : 2019-09-01 Xiaoxi Li, Jing Liu, Kemin Wang
Abstract We investigate whether pledgee competition affects the disclosure choice of firms whose controlling shareholders pledge their shares. We find that pledgee competition is positively related to pledge firms’ annual report tone management. This positive relationship is stronger for pledge firms with lower credit quality and non-state-owned enterprise pledge firms. Further corroborating our results
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Reputation repair and corporate donations: An investigation of responses to regulatory penalties China Journal of Accounting Research Pub Date : 2019-09-01 Xue Xia, Fei Teng, Xiaolong Gu
Abstract According to the risk management and reputation insurance theory of corporate social responsibility, corporate donations can help a company to repair its reputation after a crisis. This study uses a propensity score matching–difference in difference (PSM + DID) methodology to investigate the charitable donation activities of companies that have been subject to regulatory penalties. The analysis
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Facebook posting activity and the selective amplification of earnings disclosures China Journal of Accounting Research Pub Date : 2019-06-01 Rajib Hasan, William M. Cready
Abstract This study examines the determinants of Facebook activity levels with a particular focus on Facebook activity around earnings announcements. Facebook activity is generally higher for firms with higher levels of analyst following, individual ownership, and trading volume, indicating that it is responsive to investor demand effects. Facebook activity also increases around earnings announcements
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Mandatory IFRS adoption and management forecasts: The impact of enforcement changes China Journal of Accounting Research Pub Date : 2019-03-01 Zhaoyang Gu, Jeff Ng, Albert Tsang
Abstract We examine how concurrent enforcement changes affect the positive relationship between mandatory IFRS adoption and firms’ voluntary disclosure. We show that the increase in the issuance of management forecasts after IFRS adoption is smaller for firms from IFRS-mandating countries with concurrent enforcement changes than for those from countries without such changes. We find no difference in
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Does corporate integrity improve the quality of internal control? China Journal of Accounting Research Pub Date : 2018-12-01 Wei Shu, Ying Chen, Bin Lin, Ying Chen
Abstract Using unique survey data to measure corporate integrity, we examine the relation between corporate integrity and internal control quality. The results show that corporate integrity is significantly and negatively associated with internal control weaknesses. We find a substitution effect between informal and formal institutions for improving internal control quality. In other words, the negative
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The effect of non-recurring items on analysts’ earnings forecasts China Journal of Accounting Research Pub Date : 2018-03-01 Nan Li, Hongtong Su, Wanqing Dong, Kai Zhu
Abstract This article discusses the effects of non-recurring profits and losses on statement users’ decision-making processes from the perspective of securities analysts. We examine the relationship between analysts’ forecast revisions and firms’ non-recurring earnings. We find that 1) non-recurring gains and losses can influence analysts’ earnings forecast revision; 2) compared with non-recurring
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Identifying M&A targets and the information content of VC/PEs China Journal of Accounting Research Pub Date : 2018-03-01 Qingquan Tang, Wenfei Li
Abstract The information gap in the M&A market hinders acquirers from effectively identifying high-quality targets. We examine whether VC/PEs convey information content in the M&A market and whether acquirers can use such information to identify high-quality targets. We show that VC/PEs have significant information content and can signal high-quality target companies via “certification”. When acquirers
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Banking deregulation and corporate tax avoidance China Journal of Accounting Research Pub Date : 2017-06-01 Bill B. Francis,Ning Ren,Qiang Wu
Abstract We investigate whether tax avoidance substitutes for external financing. We exploit interstate banking deregulation as a quasi-external shock to examine whether firms engage in less tax avoidance after banking deregulation, because of cheaper and easier access to credit from banks. We find no empirical evidence to support this substitutive relation, even for firms with higher financial constraints
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Geographical relationships and CEO compensation contracts China Journal of Accounting Research Pub Date : 2017-06-01 Junli Yu, Wei Xu, Ping Zhang
Abstract In this paper, we empirically analyze the effects that the geographical relationships between chairman and CEO have on the latter’s compensation contracts, based on samples of listed A-share private firms from 2005 to 2014. We find that geographical relationships are related to lower pay–performance sensitivity, and that the correlation mainly exists in poor performance periods, suggesting
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Accounting research in banking – A review China Journal of Accounting Research Pub Date : 2017-03-01 Gerald J. Lobo
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Regulatory pressure and income smoothing by banks in response to anticipated changes to the Basel II Accord China Journal of Accounting Research Pub Date : 2017-03-01 Chu Yeong Lim, Kevin Ow Yong
Abstract We examine the effects of the revised Basel II rules on bank managers’ discretionary behavior, specifically income smoothing and loan loss provisioning. As the revised rules exert greater regulatory pressure on corporate than retail banking, we predict corporate bank managers to reduce risk-taking activities or increase income smoothing. Analysis of segmental reports reveals greater (less)
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Are all investment decisions to subscribe to new stocks mindless? China Journal of Accounting Research Pub Date : 2016-12-01 Zhe Li, Fang Wang, Xiaohong Dong
Abstract The IPO process is a way for companies to improve their corporate governance and for investors to assess company quality. This paper posits that investor choices vary with differences in investment ability and experience. Three groups of investors with large holdings, namely individual investors, blue-chip institutional investors and underperforming institutional investors, are compared by
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Accounting information quality, governance efficiency and capital investment choice China Journal of Accounting Research Pub Date : 2016-12-01 Jinbu Zhai, Yutao Wang
Abstract This paper examines the relationship between accounting information quality and capital investment choice from the perspective of accounting information’s governance function. Measuring capital investment choice as the correlation of growth of operating income between company and industry, this paper investigates whether and to what extent companies focus on their core business. The results
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Bank equity connections, intellectual property protection and enterprise innovation – A bank ownership perspective China Journal of Accounting Research Pub Date : 2016-09-01 Xing Liu, Shuiquan Jiang
Abstract This study investigates the effects of bank equity connections and intellectual property protection on enterprises’ innovation behavior, and the regulating effect of intellectual property protection on the relationship between bank equity connections and innovation. In general, bank equity connections and intellectual property protection not only significantly increase innovation input, but
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Income smoothing and the cost of debt China Journal of Accounting Research Pub Date : 2016-09-01 Si Li, Nivine Richie
Using the Tucker-Zarowin (TZ) statistic of income smoothing, we find firms with higher income smoothing rankings exhibit lower cost of debt and higher credit ratings. Multivariate analysis reveals that firms with higher financial leverage and lower credit ratings experience are associated with higher borrowing costs, but that such borrowing costs can be reduced by smoothing reported income. Furthermore
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Earnings management, corporate governance and expense stickiness China Journal of Accounting Research Pub Date : 2016-03-01 Shuang Xue, Yun Hong
Abstract Cost and expense stickiness is an important issue in accounting and economics research, and the literature has shown that cost stickiness cannot be separated from managers’ motivations. In this paper, we examine the effects that earnings management has on expense stickiness. Defining small positive profits or small earnings increases as earnings management, we observe significant expense stickiness