Publication Type
Journal Article
Version
submittedVersion
Publication Date
9-2020
Abstract
Using data from China, we examine whether and how the incentive to boost GDP growth at the government level affects earnings management at the firm level. We find that firms in provinces with GDP growth lower than the national level or the average of the adjacent provinces are more likely to engage in earnings management than firms in other provinces. Specifically, they are more likely to inflate revenues, overproduce, and delay asset impairment losses. The aggregate earnings management induced by GDP growth incentives accounts for about 0.5% of GDP. The results are stronger for local state-owned enterprises, in provinces with a lower level of marketization, for firms in provinces with younger governors, and in the years immediately prior to the turnover of provincial officials. Overall, this paper provides systematic evidence on how firms engage in earnings management to boost the GDP growth in their provinces.
Keywords
GDP growth, Earnings management, China
Discipline
Accounting | Asian Studies | Corporate Finance
Research Areas
Corporate Reporting and Disclosure
Publication
Review of Accounting Studies
Volume
25
Issue
3
First Page
1002
Last Page
1039
ISSN
1380-6653
Identifier
10.1007/s11142-020-09547-8
Publisher
Springer Verlag (Germany)
Citation
CHEN, Xia; CHENG, Qiang; HAO, Ying; and LIU, Qiang.
GDP growth incentives and earnings management: evidence from China. (2020). Review of Accounting Studies. 25, (3), 1002-1039.
Available at: https://ink.library.smu.edu.sg/soa_research/1873
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1007/s11142-020-09547-8
Included in
Accounting Commons, Asian Studies Commons, Corporate Finance Commons