Publication Type
Journal Article
Version
acceptedVersion
Publication Date
6-2020
Abstract
We examine the impact of China’s anti-corruption campaign on firm-level financial reporting quality (FRQ). As an important component of the anti-corruption campaign, in October 2013, “Rule 18” was issued to prohibit party and government officials from serving as directors for publicly listed firms. The regulation led to a large number of official directors resigning from their roles as directors involuntarily. As such, Rule 18 has effectively weakened, if not fullydiscontinued, the political connections of the firms that previously hired officials as directors. Our empirical analyses employ a difference-in-differences research design with firm fixed effects and PSM to examine the pre- and post- period FRQ around the enactment of Rule 18. We find that, compared to propensity-score-matched control firms, FRQ of firms with resigned officialdirector increases after Rule 18. Further evidence suggests that the impact is stronger when firms are located in regions with more developed financial markets and in regions with higher judiciary efficiency. We also find that the effect is more pronounced when firms are non-state-owned, received preferential credits, and face refinancing pressure.
Keywords
Anti-Corruption Campaign, Financial Reporting Quality, Political Connections, China, Quasi Experiment
Discipline
Accounting | Asian Studies | Finance and Financial Management
Research Areas
Corporate Reporting and Disclosure
Publication
Contemporary Accounting Research
Volume
37
Issue
2
First Page
1015
Last Page
1043
ISSN
0823-9150
Identifier
10.1111/1911-3846.12557
Publisher
Wiley
Citation
HOPE, Ole-Kristian; YUE, Heng; and ZHONG, Qinlin.
China's anti‐corruption campaign and financial reporting quality. (2020). Contemporary Accounting Research. 37, (2), 1015-1043.
Available at: https://ink.library.smu.edu.sg/soa_research/1818
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/10.1111/1911-3846.12557