Article2021

Confucianism and Earnings Management: Evidence from China

30 citations0/0 files storedEmerging Markets Finance and Trade

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Auditing, Earnings Management, Governance Corporate Governance and Financial Management Culture, Economy, and Development Studies

Abstract

Using a sample of Chinese listed firms from 2007 to 2017, this paper examines the impact of Confucianism on earnings management. We find that Confucianism is significantly negatively associated with earnings management. Further analyses suggest that the inhibitory effect of Confucianism on earnings management is more pronounced when firms have weak monitoring mechanisms such as poorer corporate governance, lower institutional ownership, and less analyst coverage. Moreover, only Confucianism has a significant restraining effect on earnings management after controlling for both Confucianism and religion. Overall, our study not only contributes to the literature on earnings management from the perspective of informal systems but also deepens our understanding of the economic consequences of Confucianism at the firm-level.

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References

1984Upper Echelons: The Organization as a Reflection of Its Top Managers 1984Upper Echelons: The Organization as a Reflection of Its Top Managers 2000The New Institutional Economics: Taking Stock, Looking Ahead 2005The economic implications of corporate financial reporting 2003Earnings Management through Real Activities Manipulation 2005Law, finance, and economic growth in China 2008Analyst coverage and earnings management 2011The Impact of Religion on Financial Reporting Irregularities

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