Financial reporting and disclosure practices in China

Hai Lu, Jee-Eun Shin and Mingyue Zhang

Journal of Accounting and Economics, 2023, vol. 76, issue 1

Abstract: We study financial reporting and disclosure practices in China using survey methods similar to prior studies of U.S. firms (i.e., Graham et al., 2005; Dichev et al., 2013). Comparing earnings features, motives to manage and smooth earnings, and voluntary disclosure practices between the two countries, we reveal three major differences. First, Chinese firms exhibit a stronger preference for predictive, relative to verifiable, attributes of earnings that can signal stable firm performance to their stakeholders. Second, smooth earnings are desired by various stakeholders and can be achieved through coordination among connected stakeholders, which is conceptually different from earnings management. Third, Chinese firms consider public disclosure as less relevant in the reduction of the cost of capital. In addition, Chinese firms do not have a bias towards conservative reporting. We explain and reconcile these differences as resulting from some unique institutional features of China. Our study provides novel field evidence that contributes to, expands, and directly corroborates existing empirical studies.

Keywords: Financial reporting; Disclosure; Information quality; Field study; China (search for similar items in EconPapers)
JEL-codes: G10 G18 M41 M48 N25 P52 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:76:y:2023:i:1:s0165410123000228

DOI: 10.1016/j.jacceco.2023.101598

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