Government involvements and earnings management

Yatong Wang, Zhi Qiao and Liang Jin

Finance Research Letters, 2023, vol. 55, issue PA

Abstract: This study investigates the effects of government involvements in shaping the relationship between investment opportunity and earnings management in politically inactive frms. Based on a unique setting in China, where the geographic distance between firms and local governments is set exogenously, we find that government involvements significantly decrease politically inactive firms’ reported earnings for firms with high investment opportunity. Overall, we fill the literature gap by providing supporting evidence about firms with better investment opportunity can use earnings disclosure strategy access to more external financing.

Keywords: Political connections; Investment opportunity; Earnings management (search for similar items in EconPapers)
JEL-codes: G31 M41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002271

DOI: 10.1016/j.frl.2023.103855

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