A game of accounting numbers in asset pricing: Evidence from the privatization of state-owned enterprises

Charles J.P. Chen, Jun Du and Xijia Su

Journal of Contemporary Accounting and Economics, 2014, vol. 10, issue 2, 115-129

Abstract: This study examines a public policy issue: whether government officials engage in earnings management to collude with private investors in the privatization of state-owned enterprises (SOEs). We find that the managers of listed Chinese SOEs, who are de facto bureaucrats, employ income-decreasing earnings management to reduce the price of shares to be sold to private investors. We also find that more aggressive income-decreasing earnings management is associated with a lower CEO turnover rate in the year following the privatization. These findings highlight the need to consider the opportunism of government agents when accounting information is used in redistribution of state assets.

Keywords: Earnings management; SOEs; Privatization; Rent-seeking (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:10:y:2014:i:2:p:115-129

DOI: 10.1016/j.jcae.2014.05.001

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Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi

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