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State Ownership and Accounting Quality: Evidence from State-Owned Enterprises in China

Author

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  • Yu Gong

    (Department of Accounting and Taxation, School of Management, Kyung Hee University, Seoul 02447, Korea)

  • Seung Uk Choi

    (Department of Accounting and Taxation, School of Management, Kyung Hee University, Seoul 02447, Korea)

Abstract

The inherent problems of state-owned enterprises (SOEs), such as the lack of external monitoring, may harm their accounting quality. However, the results from prior research are not consistent. Therefore, this study investigates the effect of state ownership of SOEs on accounting quality, measured by earnings management. Using the samples of listed SOEs in the A-share market in China from 2009 to 2017, the results indicate that there is a significant and positive relationship between state ownership and earnings management. Furthermore, the results show that higher competition within the industry can effectively inhibit the negative effect of state ownership on accounting quality. Interestingly, the positive relationship between state ownership and earnings management has weakened in recent years, suggesting that the recent mixed-ownership reform of SOEs is effectively working. Collectively, current study extends prior research by focusing on SOEs in a planned economy and by combining the mixed-ownership reform with earnings management. Consequently, this study provides practical implication to regulatory bodies by showing that state ownership plays an important role in the accounting quality of SOEs.

Suggested Citation

  • Yu Gong & Seung Uk Choi, 2021. "State Ownership and Accounting Quality: Evidence from State-Owned Enterprises in China," Sustainability, MDPI, vol. 13(15), pages 1-17, August.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:15:p:8659-:d:607595
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    References listed on IDEAS

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    Cited by:

    1. Yanfei Bai & Dongxue Zhai & Xuefeng Zhao & Delin Wu, 2023. "The Impact of Property Rights Structure on High-Quality Development of Enterprises Based on Integrated Machine Learning—A Case Study of State-Owned Enterprises in China," Sustainability, MDPI, vol. 15(4), pages 1-23, February.
    2. Chaohong Na & Xue Chen & Xiaojun Li & Yuting Li & Xiaolan Wang, 2022. "Digital Transformation of Value Chains and CSR Performance," Sustainability, MDPI, vol. 14(16), pages 1-24, August.
    3. Fusheng Xie & Peixiang Yang, 2023. "Research on the Impact of Mixed Reform of State-Owned Enterprises on Enterprise Performance—Based on PSM-DID Method," Sustainability, MDPI, vol. 15(4), pages 1-27, February.

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