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This study tests the proposal that by undertaking voluntary capital expenditures that are subject to lengthy environmental regulatory delays, listed companies can gain a competitive advantage. The stock market is found to react positively to new capital expenditure announcements when projects are expected to experience long delays in obtaining environmental regulatory approval. Two sources of potential competitive advantage are firm learning and first mover advantages. Lengthy delays in regulatory processes and high compliance costs incurred for environmentally‐sensitive projects may allow firms opportunities to develop specialised capabilities and/or to deter industry competitors and new entrants, resulting in greater expected project NPVs. The findings also underscore the importance of non‐financial environmental information to investors in their assessment of firm value.

Purpose This study investigates the links between accounting values in Chinese listed companies" balance sheets and the exposure of their fraudulent activities.Design/methodology/approach Every balance sheet account is proposed to be a potential vehicle to manipulate financial statements.Findings Other receivables, inventories, prepaid expenses, employee benefits payables and long-term payables are important indicators of fraudulent financial statements. These results confirm that asset account manipulation is frequently carried out and cast doubt on earlier conclusions by researchers that inflation of liabilities is the most common source of financial statement manipulation.Originality/value Prior practices of solely scaling balance sheet values by assets are revealed to produce spurious relationships, while scaling by both assets and sales effectively detects fraudulent financial statements and provides a useful fraud prediction tool for Chinese auditors, regulators and investors.

This study investigates the links between accounting values in Chinese listed companies" balance sheets and the exposure of their fraudulent activities. Design/methodology/approach Every balance sheet account is proposed to be a potential vehicle to manipulate financial statements. Findings Other receivables, inventories, prepaid expenses, employee benefits payables and long-term payables are important indicators of fraudulent financial statements. These results confirm that asset account manipulation is frequently carried out and cast doubt on earlier conclusions by researchers that inflation of liabilities is the most common source of financial statement manipulation. Originality/value Prior practices of solely scaling balance sheet values by assets are revealed to produce spurious relationships, while scaling by both assets and sales effectively detects fraudulent financial statements and provides a useful fraud prediction tool for Chinese auditors, regulators and investors.

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