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- Title
Does an item change trigger earnings management? Evidence from asset disposal income in China.
- Authors
Qi Yang; Dejun Wu
- Abstract
We explore a unique regulatory change in 2017 in China that requires firms to move the non-current assets disposal income in the income statement from below the line of operating income to above it. We find that firms that have incentives to avoid losses conduct upward earnings management using the noncurrent assets disposal income after the regulatory change. We also find that this earnings management behaviour is more pronounced for firms in the growth and decline stages, and for firms with weak market competition power. In addition, such behaviour damages firm's operating performance and innovation in the next year.
- Subjects
CHINA; EARNINGS management; FINANCIAL statements; WORKING capital; ASSETS (Accounting); MARKET power; FINANCE
- Publication
Accounting & Finance, 2020, Vol 60, Issue 5, p4593
- ISSN
0810-5391
- Publication type
Article
- DOI
10.1111/acfi.12665