State Ownership and Accounting Quality: Evidence from State-Owned Enterprises in China

Yu Gong and Seung Uk Choi
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Yu Gong: Department of Accounting and Taxation, School of Management, Kyung Hee University, Seoul 02447, Korea
Seung Uk Choi: Department of Accounting and Taxation, School of Management, Kyung Hee University, Seoul 02447, Korea

Sustainability, 2021, vol. 13, issue 15, 1-17

Abstract: The inherent problems of state-owned enterprises (SOEs), such as the lack of external monitoring, may harm their accounting quality. However, the results from prior research are not consistent. Therefore, this study investigates the effect of state ownership of SOEs on accounting quality, measured by earnings management. Using the samples of listed SOEs in the A-share market in China from 2009 to 2017, the results indicate that there is a significant and positive relationship between state ownership and earnings management. Furthermore, the results show that higher competition within the industry can effectively inhibit the negative effect of state ownership on accounting quality. Interestingly, the positive relationship between state ownership and earnings management has weakened in recent years, suggesting that the recent mixed-ownership reform of SOEs is effectively working. Collectively, current study extends prior research by focusing on SOEs in a planned economy and by combining the mixed-ownership reform with earnings management. Consequently, this study provides practical implication to regulatory bodies by showing that state ownership plays an important role in the accounting quality of SOEs.

Keywords: state ownership; state-owned enterprises (SOEs); accounting quality; earnings management; industry competition; mixed-ownership reform (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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