Capital market liberalization and accounting quality: Evidence from China

Yifu Zhang

Finance Research Letters, 2024, vol. 64, issue C

Abstract: Introducing the Shanghai-Shenzhen-Hong Kong Stock Connects (the Connects) as an exogenous shock, we find that capital market liberalization significantly reduces real earnings management, accrual earnings management, earnings smoothing, and promotes information disclosure evaluation grades for A-share companies. Heterogeneity analysis indicates that this favorable impact is more significant for companies with poorer information environments, higher auditor reputation risks, higher corporate governance quality, and stronger executive compensation incentives. This study further contributes to the literature on the impacts of capital market liberalization on accounting quality by providing new empirical evidence from China.

Keywords: Shanghai–Shenzhen–Hong Kong Stock Connects; Capital market liberalization; Accounting quality; Corporate governance (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:64:y:2024:i:c:s1544612324004896

DOI: 10.1016/j.frl.2024.105459

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