An exploratory study of earnings management detectability, analyst coverage and the impact of IFRS adoption: Evidence from China

doi:10.1016/j.jaccpubpol.2014.04.003

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	An exploratory study of earnings management detectability, analyst coverage and the impact of IFRS adoption: Evidence from China
	Cang, Yongtao 1; Chu, Yiyun 2; Lin, Thomas W.3
刊名	JOURNAL OF ACCOUNTING AND PUBLIC POLICY
	2014-07-01
卷号	33 期号:4 页码:356-371
ISSN号	0278-4254
DOI	10.1016/j.jaccpubpol.2014.04.003
英文摘要	Analysts serving as external monitors to managers is a topic of considerable interest in the analyst coverage literature. There are two outcomes of analyst coverage studies: curbing and stimulating earnings management. However, recent studies (such as Yu, 2008) only provide evidence supporting the curbing side. Given the fact that the data of these studies focus on developed markets and the finding of Rodriguez-Perez and Hemmen (2010) that external governance mechanisms may stimulate earnings management in an opaque information environment, we conjecture whether stimulating side would be dominant in emerging markets. China offers a valuable setting for us to test the question. Using the data of China capital market from 2003 to 2009, we find that analyst coverage stimulates earnings management through above-the-line items (ALls) where earnings management cannot be easily detected, and curbs earnings management through below-the-line items (BLIs) where earnings management can be easily detected. We also find that the adoption of International Financial Reporting Standards (IFRS) in China does create many new opportunities for managers' earnings management but does not significantly improve the monitoring effect of analyst coverage. We only find that compared to those without analyst coverage, firms with analyst coverage have a lower level of earnings management through BLIs after IFRS adoption. These findings suggest that information opacity may weaken the monitoring effect of external corporate governance mechanisms and high quality accounting standards in the literal sense may not enhance the monitoring effect of external corporate governance mechanisms if it is not compatible with the market's institutional environment. In addition, we find that firms with earnings meeting the benchmark have a lower level of earnings management, which indicates that bright-line accounting based rules used in emerging capital markets may constrain the managers' behavior. (C) 2014 Elsevier Inc. All rights reserved.
WOS研究方向	Business & Economics ; Public Administration
语种	英语
出版者	ELSEVIER SCIENCE INC
WOS记录号	WOS:000340994800003
内容类型	期刊论文
源URL	[http://10.2.47.112/handle/2XS4QKH4/1723]
专题	上海财经大学
通讯作者	Lin, Thomas W.
作者单位	1.Shanghai Int Studies Univ, Coll Int Finance & Commerce, Shanghai 200083, Peoples R China; 2.Shanghai Univ Finance & Econ, Sch Accountancy, Inst Accounting & Finance, Shanghai 200433, Peoples R China; 3.Univ So Calif, Leventhal Sch Accounting, Los Angeles, CA 90089 USA
推荐引用方式 GB/T 7714	Cang, Yongtao,Chu, Yiyun,Lin, Thomas W.. An exploratory study of earnings management detectability, analyst coverage and the impact of IFRS adoption: Evidence from China[J]. JOURNAL OF ACCOUNTING AND PUBLIC POLICY,2014,33(4):356-371.
APA	Cang, Yongtao,Chu, Yiyun,&Lin, Thomas W..(2014).An exploratory study of earnings management detectability, analyst coverage and the impact of IFRS adoption: Evidence from China.JOURNAL OF ACCOUNTING AND PUBLIC POLICY,33(4),356-371.
MLA	Cang, Yongtao,et al."An exploratory study of earnings management detectability, analyst coverage and the impact of IFRS adoption: Evidence from China".JOURNAL OF ACCOUNTING AND PUBLIC POLICY 33.4(2014):356-371.