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Employee Cash Profit-Sharing and Earnings Management

Author

Listed:
  • Dongmin Kong
  • Ni Qin
  • Wei Yang
  • Jian Zhang

Abstract

This paper examines how a firm’s employment policy, particularly employee cash profit-sharing plans, affects its financial reporting. We find that firms with employee cash profit-sharing programs are more likely to engage in downward earnings management to reduce labor costs, especially with decreasing performance. This effect is more evident in firms with higher labor costs and human-capital reliant firms. Our findings are robust to a variety of model specifications and endogeneity problems.

Suggested Citation

  • Dongmin Kong & Ni Qin & Wei Yang & Jian Zhang, 2022. "Employee Cash Profit-Sharing and Earnings Management," European Accounting Review, Taylor & Francis Journals, vol. 31(3), pages 761-785, May.
    • Handle: RePEc:taf:euract:v:31:y:2022:i:3:p:761-785
    DOI: 10.1080/09638180.2020.1858914
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    Cited by:

    1. Wang, Ping & Chi, Mingyuan & Wang, Xiaochun, 2023. "Overseas listing and earnings management methods selection," Finance Research Letters, Elsevier, vol. 55(PB).
    2. Gao, Yihong & Gao, Jiayan, 2023. "Employee protection and trade credit: Learning from China's social insurance law," Economic Modelling, Elsevier, vol. 127(C).
    3. Tian, Junmin & Sun, Hui, 2023. "Corporate financialization, internal control and financial fraud," Finance Research Letters, Elsevier, vol. 56(C).
    4. Chen, Guang & Wang, Min, 2023. "Stock market liberalization and earnings management: Evidence from the China–Hong Kong Stock Connects," Finance Research Letters, Elsevier, vol. 58(PB).
    5. Liao, Haojie & Wei, Yi & Wang, Yun & Lin, Yibin & Tan, RongYong, 2023. "Managerial ability and earnings management: The moderating role of career concerns✰," Finance Research Letters, Elsevier, vol. 57(C).
    6. Yang, Guang-Zhao & Si, Deng-Kui & Ning, Guang-Jie, 2023. "Does digital transformation reduce the labor income share in enterprises?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1526-1538.

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