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Earnings management of Chinese central state-owned enterprises – the effects of state level incentives

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  • Hong Fan
  • Xiaofei Song

Abstract

This study builds upon the argument of alignment effect and posits that the close alignment of the interests between Chinese central state-owned enterprises (CSOEs) and those of the Chinese central government creates state-level incentives (e.g. GDP volatility mitigation) for CSOEs to manage earnings. Consistent with our proposition we find that Chinese CSOEs engage in earnings management to reduce GDP volatility. Furthermore, we find that Chinese CSOEs only use the real earnings management approaches that also reduce enterprise earnings volatility to mitigate GDP volatility.

Suggested Citation

  • Hong Fan & Xiaofei Song, 2019. "Earnings management of Chinese central state-owned enterprises – the effects of state level incentives," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 26(6), pages 643-658, November.
    • Handle: RePEc:taf:raaexx:v:26:y:2019:i:6:p:643-658
    DOI: 10.1080/16081625.2017.1386576
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    Cited by:

    1. Shan Lu & Peng Wu & Lei Gao & Richard Gifford, 2023. "Are State-Owned Enterprises Equally Reliable Information Suppliers? An Examination of the Impacts of State Ownership on Earnings Management Strategies of Chinese Enterprises," Mathematics, MDPI, vol. 11(4), pages 1-26, February.
    2. Liu, Shengqiang & Lin, Shu & Sun, Zhaoyu & Yuan, Lihua, 2021. "Earnings management and firms' investment behavior: The threshold effect of ROE," Emerging Markets Review, Elsevier, vol. 47(C).
    3. Xiaoli Gao & Weiwei Zhang, 2023. "Can Innovation Incentive Policies Improve the Innovation Performance of Knowledge Workers? Evidence from Chinese State-Owned Enterprises," Sustainability, MDPI, vol. 15(3), pages 1-16, January.
    4. Liqiang Chen & Hong Fan & Xiaofei Song, 2023. "Impact of professor‐directors on Chinese firms' environmental performance," International Review of Finance, International Review of Finance Ltd., vol. 23(4), pages 696-720, December.

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