Earnings management at rights issues thresholds—Evidence from China

Qiao, Yu; Du, Bin; Sun, Qiang

doi:10.1016/j.jbankfin.2006.01.011

Cited by 99 publications

(85 citation statements)

References 16 publications

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“…Teoh et al (1998b) and DuCharme et al (2011) shows firms with extensive earnings management prior to IPOs or in IPO year tend to experience poor stock performance in the following three years. Yu et al (2006) indicate that Chinese firms actively engaged in earnings management to meet the minimal ROE (return-on-equity) requirements to have rights issues. Rangan (1998) and Teoh et al (1998a) find that earnings management around the year of seasoned equity offerings explains a portion of the subsequent lower stock and earnings performance.…”

Section: Fraud and Executive Integritymentioning

confidence: 99%

Executive integrity, audit opinion, and fraud in Chinese listed firms

Chen

Cumming

Hou

et al. 2013

Emerging Markets Review

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We examine the influence of auditors on corporate fraud in China. We find lower executive integrity firms are associated with higher propensity of regulatory enforcement actions against corporate fraud in the subsequent year. We then show that this effect is moderated by the issuance of modified audit opinion report by the auditors. This finding implies that auditors can serve an early warning role to discourage low integrity executives from engaging in corporate fraud. Our results have policy implications for further strengthening auditor independence in emerging countries like China.JEL classification: G15; G30; K22; M41

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Section: Fraud and Executive Integritymentioning

confidence: 99%

Executive integrity, audit opinion, and fraud in Chinese listed firms

Chen

Cumming

Hou

et al. 2013

Emerging Markets Review

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“…Therefore, we find important number of studies from developing Chinese market, see for example: Lee and Xue (2004); Yu et al (2006);Lin (2006) ;Lin, Liu and Wang (2007); or Korean market Yoon and Miller (2002); Kim and Yi (2005); Malasian Saleh et al (2005); Rahman et al (2005); Bukit and Iskandar (2009);Bangladesh: Razzaque, et al (2006), Callao, et al (2014a, among others.…”

Section: Literature Reviewmentioning

confidence: 99%

Why Do Companies From Emerging Countries Manage Earnings?

Callao¹,

Jarne²,

Wróblewski³

2017

EJBM

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This paper provides evidence in terms of the incentives which lead managers from emerging European countries to manage earnings. In particular, we focused on four Eastern European countries: the Czech Republic, Poland, Hungary and Slovakia, as the majority of studies on earnings management in developing countries were based on the Asian emerging market. The market of developing European countries is still barely explored. After we confirmed that managers from emerging European companies manage earnings, we find that within the different incentives which lead managers to earnings management, the avoidance of debt covenants violations is a strong incentive for managers. Additionally, those firms considered as poor investments (with less value) have incentives to manage earnings down as a consequence to opt for market niche. Moreover, emerging Eastern European companies have incentives to flatten earnings of current periods in order to benefit in the future as the source of future nonmanipulated earnings will be insufficient, as they may expect reduced, or at least lower future performance of their companies affected by increasing global competition. Finally, we confirm that privately-owned companies tend to maximize accounting earnings more than state-owned companies because they are in a weaker position related to a specific political and historical factors.

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“…The overwhelming demand for rights offering forced the China Securities Regulatory Commission (CSRC) to use the return on equity (ROE) requirement to set the threshold. As a result, not only did a majority of firms manipulate earnings to meet the ROE requirement (Chen and Yuan, 2004;Haw et al, 2005;Yu, Du, and Sun, 2006;Liu and Lu, 2007), but also local governments provided subsidies to help listed firms, especially those firms largely held by local governments, to boost their ROE (Chen, Lee, and Li, 2008).…”

Section: Structural Changes In Firms' Access To the Capital Marketmentioning

confidence: 99%

“…Specifically, contractual terms in government regulations create strong incentives for firms to manage earnings to maintain their listing status relative to incentives to provide investors with transparent information. For example, several studies document the phenomenon that firms manage their earnings to meet the regulatory ROE benchmark for rights issue (Chen and Yuan, 2004;Haw et al, 2005;Yu, Du, and Sun, 2006). Moreover, the delisting regulation that states that a firm will be delisted if it reports a loss for three consecutive years gives managers another strong incentive to manipulate earnings upward.…”

Section: Financial Reporting: Accounting Standards Reform and Firms' mentioning

confidence: 99%

Structural Changes in the Chinese Stock Market: A Review of Empirical Research

2014

China Account Financ Rev

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China’s stock market has gone through major structural changes since its inception in the early 1990s. In this survey article, we review the empirical literature published in 15 leading accounting and finance journals from 1998 to 2013 that documents these important structural changes. In analysing this literature, we focus on the ‘distinctiveness’ of the Chinese stock market compared with developed stock markets (e.g. US) and the research opportunities generated by the China setting. Key themes include China’s share issue privatisation (SIP) reforms, the political connections in privately owned companies, the characteristics of Chinese listed companies and their governance, the regulatory environment reforms in China, and the evolving role played by auditors and other information intermediaries.

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Earnings management at rights issues thresholds—Evidence from China

Cited by 99 publications

References 16 publications

Executive integrity, audit opinion, and fraud in Chinese listed firms

Executive integrity, audit opinion, and fraud in Chinese listed firms

Why Do Companies From Emerging Countries Manage Earnings?

Structural Changes in the Chinese Stock Market: A Review of Empirical Research

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