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Effect of accounting information manipulation on innovation: Evidence from China

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  • Ning, Shuying
  • Lin, Zhiyang

Abstract

This study focuses on the real effect of accounting information manipulation. We find that accrual-based earnings management (AEM) impairs corporate innovation in China and the mechanisms include formal (i.e., financing) and informal (i.e., trust) channels. First, AEM impedes access to equity and debt financing, and government technological subsidies. Second, firms with AEM are considered less trustworthy, leading to less collaborative innovation. Furthermore, AEM leads to less R&D input and lower innovation efficiency. Our study reveals the mechanisms through which accounting information quality affects corporate innovation in emerging markets and demonstrates how accounting information affects economic outputs by influencing mutual trust.

Suggested Citation

  • Ning, Shuying & Lin, Zhiyang, 2023. "Effect of accounting information manipulation on innovation: Evidence from China," Emerging Markets Review, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:ememar:v:56:y:2023:i:c:s1566014123000638
    DOI: 10.1016/j.ememar.2023.101058
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    More about this item

    Keywords

    Accrual-based earnings management; Innovation; Fund raising; Trust; Cooperation;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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