Trading and earnings management: Evidence from China's non-tradable share reform

Gang Xiao

Journal of Corporate Finance, 2015, vol. 31, issue C, 67-90

Abstract: This paper examines the effect of trading on earnings management under the setting of China's non-tradable share reform. The government-enforced reform converted non-tradable shares to tradable and thus enabled blockholders and insiders to reduce holdings via public trading. We find significant increases in accruals among Chinese listed companies after the reform. The impact of the reform on earnings manipulations is increasing with the potential for share trading, the degree of information asymmetry and the intensity of stock selling by insiders and blockholders. Our findings support that trading by large shareholders and insiders significantly increases earnings manipulations.

Keywords: Trading; Earnings management; The non-tradable share reform of China (search for similar items in EconPapers)
JEL-codes: G14 G38 M41 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:31:y:2015:i:c:p:67-90

DOI: 10.1016/j.jcorpfin.2015.01.013

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