State Ownership and Earnings Management around Initial Public Offerings: Evidence from China

ABSTRACT This study investigates earnings management by firms around their initial public offerings (IPOs) in domestic Chinese equity markets. Using a sample of 437 IPO firms, we find that Chinese firms tend to inflate earnings around their IPOs. We also show that state-owned enterprises (SOEs) mana...

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Bibliographic Details
Published inJournal of international accounting research Vol. 14; no. 2; pp. 89 - 116
Main Authors Cheng, C. S. Agnes, Wang, Jing, Wei, Steven X.
Format Journal Article
LanguageEnglish
Published Sarasota American Accounting Association 01.09.2015
Subjects
Bank loans
Earnings management
Initial public offerings
Private sector
Public enterprise
Studies
China
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Summary:ABSTRACT This study investigates earnings management by firms around their initial public offerings (IPOs) in domestic Chinese equity markets. Using a sample of 437 IPO firms, we find that Chinese firms tend to inflate earnings around their IPOs. We also show that state-owned enterprises (SOEs) manage earnings to a lesser degree than non-state-owned enterprises (NSOEs) do around IPOs. Furthermore, using path analysis, we find that two incentive factors, CEO shareholding and accessibility to bank loans, explain 48 percent of the correlation between state ownership and earnings management for IPO firms. In particular, accessibility to bank loans is a more important incentive factor that leads to less earnings management for SOEs than NSOEs.
ISSN:1542-6297
1558-8025
DOI:10.2308/jiar-51193