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dc.contributor.authorNnadi, Matthias
dc.contributor.authorOmoteso, Kamil
dc.contributor.authorYu, Yi
dc.date.accessioned2019-01-24T08:47:43Z
dc.date.available2019-01-24T08:47:43Z
dc.date.issued2015
dc.identifier.citationNnadi, M., Omoteso, K. and Yu, Y. (2015) 'Does Regulatory Environment affect Earnings Management in Transitional Economies? An Empirical Examination of the Financial Reporting Quality of Cross-Listed Firms of China and Hong Kong', in Jamilov, R. and Akbar, Y.H. (ed.) Neo-Transitional Economics (International Finance Review, Volume 16). Emerald Group Publishing Limited, pp. 245-276.en_US
dc.identifier.isbn978-1-78441-682-9
dc.identifier.urihttp://hdl.handle.net/10545/623357
dc.description.abstractThis chapter provides evidence on the impact of regulatory environment on financial reporting quality of transitional economies. This study compares the financial reporting quality of Hong Kong firms which are cross-listed in mainland China with those of Hong Kong firms cross-listed in China using specific earnings management metrics (earnings smoothing, timely loss recognition, value relevance and managing towards earnings targets) under pre- and post-IFRS regimes. The financial reporting quality of Chinese A-share companies and Hong Kong listed companies are examined using earnings management measures. Using 2007 as base year, the study used a cumulative of −5 and +5 years of convergence experience which provide a total of 3,000 firm-year observations. In addition to regression analyses, we used the difference-in-difference analysis to check for the impact of regulatory environments on earnings management. Through the lens of contingency theory, our results indicate that the adoption of the new substantially IFRS-convergent accounting standards in China results in better financial reporting quality evidenced by less earning management. The empirical results further shows that accounting data are more value relevant for Hong Kong listed firms, and that firms listed in China are more likely to engage in accrual-based earnings management than in real earnings management activities. We established that different earnings management practices that are seemingly tolerable in one country may not be tolerable in another due to level of differences in the regulatory environments. The findings show that Hong Kong listed companies’ exhibit higher level of financial reporting quality than Chinese listed companies, which implies that the financial reporting quality under IFRS can be significantly different in regions with different institutional, economic and regulatory environments. The results imply that contingent factors such as country’s institutional structures, its extent of regulation and the strength of its investor protection environments impact on financial reporting quality particularly in transitional and emerging economies. As such, these factors need to be given appropriate considerations by financial reporting regulators and policy-makers interested in controlling earnings management practices among their corporations. This study is a high impact study considering that China plays a significant role in today’s globalised economy. This study is unique as it the first, that we are aware of, to compare real earnings activities against accrual-based earnings management in pre- and post-IFRS adoption periods within the Chinese and Hong Kong financial reporting environments, distinguishing between cross-listed and non-cross-listed firms.en_US
dc.description.sponsorshipN/Aen_US
dc.language.isoenen_US
dc.publisherEmerald Group Publishing Limited.en_US
dc.relation.urlhttps://www-emeraldinsight-com.ezproxy.derby.ac.uk/doi/full/10.1108/S1569-376720150000016011en_US
dc.subjectEarnings managementen_US
dc.subjectTransitional economyen_US
dc.titleDoes Regulatory Environment affect Earnings Management in Transitional Economies? An Empirical Examination of the Financial Reporting Quality of Cross-Listed Firms of China and Hong Kongen_US
dc.typeBook chapteren_US
dc.contributor.departmentCranfield Universityen_US
dc.contributor.departmentCoventry Universityen_US
dc.internal.reviewer-noteIn progress - HL to contact Emerald and query archiving policy (18/01/19 - JEK)en
dc.dateAccepted2015
dc.dateAccepted2015
refterms.dateFOA2019-01-24T08:47:44Z


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