The dark side of rent-seeking: The impact of rent-seeking on earnings management
2018; Elsevier BV; Volume: 91; Linguagem: Inglês
10.1016/j.jbusres.2018.05.037
ISSN1873-7978
AutoresBaohua Liu, Yan Lin, Kam C. Chan, Hung‐Gay Fung,
Tópico(s)Corporate Finance and Governance
ResumoWe use Chinese firm-level data from 2009 to 2014 to examine the impact of rent-seeking on a firm's earnings management, an important indicator of quality in accounting information. We show that rent-seeking strongly promotes more earnings management, hiding firm-specific information from the market. When the Chinese government initiates an anti-corruption campaign that depresses rent-seeking activities, the significant relation between rent-seeking and earnings management disappears, confirming the predictive link of rent-seeking and earnings management. Our study clearly identifies rent-seeking as a key driver of earnings management. The positive effect of rent-seeking on earnings management is stronger at firms that are not state owned (non-SOEs) than at state-owned enterprises and at non-SOEs without political connections than at those with political connections.
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