Articlegreen2012

Tax-Induced Earnings Management in Emerging Markets: Evidence from China

79 citations0/0 files storedJournal of the American Taxation Association

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Auditing, Earnings Management, Governance Corporate Taxation and Avoidance Corporate Governance and Financial Management

Abstract

ABSTRACT China issued the New Enterprise Income Tax Law in 2007, which changed the corporate income tax rate from 33 percent to 25 percent and came into effect in 2008. Using the simulated marginal tax rate as an indicator of firms' earnings management incentives, and discretionary current accruals as a proxy for earnings management, we find significant tax-induced earnings management in 2007. However, the downward earnings management becomes less obvious for firms that have a greater percentage of shares owned by state-owned enterprises, have an audit committee on the board, and disclose certified internal control reports. Data Availability: All data are available from the second author (contact author) upon request.

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1990Institutions, Institutional Change and Economic Performance 1991Institutions, Institutional Change and Economic Performance 1991Earnings Management During Import Relief Investigations 1995Detecting Earnings Management.2000The separation of ownership and control in East Asian Corporations 2003Earnings management and investor protection: an international comparison 2002Audit committee, board of director characteristics, and earnings management 1988Outside directors and CEO turnover

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