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A game of accounting numbers in asset pricing: Evidence from the privatization of state-owned enterprises

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  • Chen, Charles J.P.
  • Du, Jun
  • Su, Xijia

Abstract

This study examines a public policy issue: whether government officials engage in earnings management to collude with private investors in the privatization of state-owned enterprises (SOEs). We find that the managers of listed Chinese SOEs, who are de facto bureaucrats, employ income-decreasing earnings management to reduce the price of shares to be sold to private investors. We also find that more aggressive income-decreasing earnings management is associated with a lower CEO turnover rate in the year following the privatization. These findings highlight the need to consider the opportunism of government agents when accounting information is used in redistribution of state assets.

Suggested Citation

  • Chen, Charles J.P. & Du, Jun & Su, Xijia, 2014. "A game of accounting numbers in asset pricing: Evidence from the privatization of state-owned enterprises," Journal of Contemporary Accounting and Economics, Elsevier, vol. 10(2), pages 115-129.
    • Handle: RePEc:eee:jocaae:v:10:y:2014:i:2:p:115-129
    DOI: 10.1016/j.jcae.2014.05.001
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    Cited by:

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    2. Rakhman, Fuad, 2018. "Can partially privatized SOEs outperform fully private firms? Evidence from Indonesia," Research in International Business and Finance, Elsevier, vol. 45(C), pages 285-292.
    3. Fan Zhang & Fei Wang & Qiao Wang, 2023. "Does the mixed‐ownership reform improve the productivity of state‐owned enterprises? Evidence from companies listed in Chinese stock," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(4), pages 1299-1321, December.
    4. Isnurhadi & Sulastri & Yulia Saftiana & Ferry Jie, 2022. "Banking Industry Sustainable Growth Rate under Risk: Empirical Study of the Banking Industry in ASEAN Countries," Sustainability, MDPI, vol. 15(1), pages 1-21, December.

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