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Trading and earnings management: Evidence from China's non-tradable share reform

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  • Xiao, Gang

Abstract

This paper examines the effect of trading on earnings management under the setting of China's non-tradable share reform. The government-enforced reform converted non-tradable shares to tradable and thus enabled blockholders and insiders to reduce holdings via public trading. We find significant increases in accruals among Chinese listed companies after the reform. The impact of the reform on earnings manipulations is increasing with the potential for share trading, the degree of information asymmetry and the intensity of stock selling by insiders and blockholders. Our findings support that trading by large shareholders and insiders significantly increases earnings manipulations.

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  • Xiao, Gang, 2015. "Trading and earnings management: Evidence from China's non-tradable share reform," Journal of Corporate Finance, Elsevier, vol. 31(C), pages 67-90.
    • Handle: RePEc:eee:corfin:v:31:y:2015:i:c:p:67-90
    DOI: 10.1016/j.jcorpfin.2015.01.013
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    Cited by:

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    3. Feng Xie & Jing Chi & Jing Liao, 2016. "From share issue privatisation to non-tradable share reform: a review of privatisation in China," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 30(2), pages 90-104, November.
    4. Kallunki, Juha-Pekka & Mikkonen, Jenni & Nilsson, Henrik & Setterberg, Hanna, 2016. "Tax noncompliance and insider trading," Journal of Corporate Finance, Elsevier, vol. 36(C), pages 157-173.
    5. Jebran, Khalil & Chen, Shihua & Zhang, Ruibin, 2020. "Board diversity and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 51(C).
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    7. Ying Cao & Feng Guan & Zengquan Li & Yong George Yang, 2020. "Analysts’ Beauty and Performance," Management Science, INFORMS, vol. 66(9), pages 4315-4335, September.

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    More about this item

    Keywords

    Trading; Earnings management; The non-tradable share reform of China;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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