Centralized Drug Procurement and asymmetric earnings management: Evidence from China

Sha Xu and Dejun Wu

Finance Research Letters, 2023, vol. 58, issue PA

Abstract: Using a difference-in-differences approach, we study the impact of Centralized Drug Procurement (CDP) on the earnings management of pharmaceutical firms in China. We find an asymmetric earnings management effect that winning firms manage earnings upward, whereas losing firms manage earnings downward. Further analyses show that upward earnings management by winning firms is stronger for firms with more analysts following, shares pledged, and strong competition, whereas downward earnings management by losing firms is more pronounced for young firms, non-state-owned enterprises, and high government subsidy firms.

Keywords: Pharmaceutical regulation; Centralized drug procurement policy; Asymmetric earnings management (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323002787

DOI: 10.1016/j.frl.2023.103906

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