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Typhoon strikes, political costs and earnings management

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  • Jun Du
  • Xinhui Dai
  • Bo Yan

Abstract

This study examines how firms in typhoon‐prone areas respond to the political costs of typhoon strikes. We found that such firms tend to engage in downward earnings management after a typhoon strike. Various robustness tests support our findings: cross‐sectional variation tests indicate that this tendency is strong in cities with high governmental intervention and incentives for political leaders and in firms with high political connections and visibility. Further analysis reveals that typhoon strikes enhance earnings management by intensifying fiscal pressure. Finally, this study provides a precise evaluation of the adverse effects of typhoons and complements the existing literature on the political cost hypothesis.

Suggested Citation

  • Jun Du & Xinhui Dai & Bo Yan, 2025. "Typhoon strikes, political costs and earnings management," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(2), pages 2065-2105, June.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:2:p:2065-2105
    DOI: 10.1111/acfi.13263
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