In this paper, we present evidence that firms with concentrated ownership manage earnings when their large shareholders have an incentive to do so.The large shareholders of Chinese public firms often pledge their shar...In this paper, we present evidence that firms with concentrated ownership manage earnings when their large shareholders have an incentive to do so.The large shareholders of Chinese public firms often pledge their shares for loans. Before the split share reform in 2006, loan terms were based on the book value of the firm. Since then, the share price has become critical for share pledged loans. We postulate that the reform triggered large shareholders' incentive to influence financial reports. Using a sample of non-state-owned enterprises, we test the effect of share pledges on earnings smoothing and how this effect changes after the reform. Our results suggest that share pledging firms smooth their earnings more than other firms, but these results are only found after the split share reform. Accordingly, our results provide more direct evidence on the effect of ownership concentration on financial reporting.展开更多
The literature on income smoothing focuses on the effect of earnings smoothing on the equity market.This paper investigates the effect of income smoothing on the debt market.Using the Tucker–Zarowin(TZ) statistic of ...The literature on income smoothing focuses on the effect of earnings smoothing on the equity market.This paper investigates the effect of income smoothing on the debt market.Using the Tucker–Zarowin(TZ) statistic of income smoothing,we find that firms with higher income smoothing rankings exhibit lower cost of debt,suggesting that the information signaling effect of income smoothing dominates the garbling effect.We also find that the effect of earnings smoothing on debt cost reduction is stronger in firms with more opaque information and greater distress risk.展开更多
基金supported by the National Natural Science Foundation (Project Nos. 70902007 and 71372029)
文摘In this paper, we present evidence that firms with concentrated ownership manage earnings when their large shareholders have an incentive to do so.The large shareholders of Chinese public firms often pledge their shares for loans. Before the split share reform in 2006, loan terms were based on the book value of the firm. Since then, the share price has become critical for share pledged loans. We postulate that the reform triggered large shareholders' incentive to influence financial reports. Using a sample of non-state-owned enterprises, we test the effect of share pledges on earnings smoothing and how this effect changes after the reform. Our results suggest that share pledging firms smooth their earnings more than other firms, but these results are only found after the split share reform. Accordingly, our results provide more direct evidence on the effect of ownership concentration on financial reporting.
文摘The literature on income smoothing focuses on the effect of earnings smoothing on the equity market.This paper investigates the effect of income smoothing on the debt market.Using the Tucker–Zarowin(TZ) statistic of income smoothing,we find that firms with higher income smoothing rankings exhibit lower cost of debt,suggesting that the information signaling effect of income smoothing dominates the garbling effect.We also find that the effect of earnings smoothing on debt cost reduction is stronger in firms with more opaque information and greater distress risk.
