Can corporate governance deter management from manipulating earnings? Evidence from related-party sales transactions in China

Lo, Agnes W. Y.; Wong, Ryc; Firth, Michael

doi:10.1016/j.jcorpfin.2009.11.002

Cited by 294 publications

(223 citation statements)

References 35 publications

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“…First, for many Chinese listed companies, the ultimate controlling shareholder is the Chinese government, which influences company management through its shareholding and political power (Liu and Lu, 2007;Lo et al, 2010). As such, managers of government-controlled firms may have different tax incentives compared with their counterparts in the private sector.…”

Section: Introductionmentioning

confidence: 99%

Government ownership, corporate governance and tax aggressiveness: evidence from China

Chan¹,

Zhou³

2013

Account Finance

113

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This study investigates how government ownership and corporate governance influence a firm's tax aggressiveness. Using Chinese listed companies during 2003-2009, we find that compared with government-controlled firms, nongovernment-controlled firms pursue a more aggressive tax strategy. In particular, non-government-controlled firms with a higher percentage of the board shareholdings and with a CEO who also serves as the board chairman are more aggressive. For government-controlled firms, we find that board shareholding has an impact on tax aggressiveness and it does not differ between local and central government-controlled firms. However, local government-controlled firms in less developed regions where the implementation of corporate governance measures is generally less effective are more tax aggressive than those in other regions.

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Section: Introductionmentioning

confidence: 99%

Government ownership, corporate governance and tax aggressiveness: evidence from China

Chan¹,

Zhou³

2013

Account Finance

113

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“…the ownership structure and corporate control. In particular, many studies focus on the relationship between ownership structure (Jian & Tak, 2010;Kun, 2005;Munir, 2010;Zengquan, Sun, & Wang, 2004), the role played by the stock market (Gordon et al, 2004;Lo, Wong, & Firth, 2010;Yeh, Shu, & Su, 2012) and the quality and relevance of RPTs in corporate life. Cernat (2004) argues that CG represents not only a crucial difference between varieties of capitalism but is also a major factor in determining their economic performance.…”

Section: Literature Review Of Rptsmentioning

confidence: 99%

Disclosure on Related Party Transactions: Evidence from Italian Listed Companies

Bava

Trana

2016

Accounting, Economics and Law: A Convivium

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Recent shortcomings in corporate affairs, related to the bursting of the New Economy Bubble and the global financial crisis, have forced regulators to strengthen current rules introducing new bans and requirements, aimed at guaranteeing the substantial and economic fairness of related party transactions (RPTs). In 2010 rules regarding RPTs were completely reshaped by the Italian Regulatory Body for the Italian Stock Exchange (CONSOB Regulation no. 17221). One of the most important amendments regarded the change in the criteria by which RPTs are mandatorily disclosed to investors. This change replaces a selection process based on a qualitative with a quantitative approach, in order to reduce the subjectivity of this particular evaluation. This study aims to analyze the effectiveness of the disclosure of RPTs after the introduction of the new rules. Our results show that although the new rules contribute to increasing the amount of information disclosed to investors through a higher number of documents reported by companies, their percentage in relation to the overall amount is worryingly low.

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“…This is because the "substance-over-form" issues are common with RPTs and some RPTs are embedded in documentation that is less clear or thorough than the documentation that ordinarily exists between unrelated parties. Reference [9] find that while relevant tax law and regulations specify that prices for RP sales should be set according to market prices as used in arm"s length transactions, practices may not be so. There is a possibility that transfer prices is treated as a mechanism to transfer resources between different stakeholders for the purpose of giving gains to some and losses to others.…”

Section: Accounting Irregularities In Rptsmentioning

confidence: 99%

Accounting Irregularities in Related Party Transactions

Ariff¹,

Hashim²

2014

IJTEF

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Abstract-This paper presents financial reporting issues surrounding Related Party Transactions (RPTs). While RPTs can be value-enhancing for companies, those that are used to expropriate shareholders' wealth may need to be shielded by accounting irregularities. We discuss the theoretical link between RPTs and accounting irregularities and review evidence on accounting irregularities involving RPTs. We also discuss issues with the existing evidence and suggest that future research should work towards identifying: a) the background of RPTs that served as expropriation mechanism, b) the types of RPTs that normally involved accounting irregularities, and c) the effect of accounting irregularities involving RPTs. The results of studies with such approach may benefit the regulators in curbing accounting irregularities, especially those that involved RPTs.

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Can corporate governance deter management from manipulating earnings? Evidence from related-party sales transactions in China

Cited by 294 publications

References 35 publications

Government ownership, corporate governance and tax aggressiveness: evidence from China

Government ownership, corporate governance and tax aggressiveness: evidence from China

Disclosure on Related Party Transactions: Evidence from Italian Listed Companies

Accounting Irregularities in Related Party Transactions

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