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Export control and earnings management: Evidence from China

Author

Listed:
  • Huang, Hengxuan
  • Liu, Suyi
  • Gong, Yuan
  • Yan, Zehao
  • Ge, Zhixiang

Abstract

This research examines whether and how U.S. export controls impact the earnings management of sanctioned Chinese firms. We find that U.S. export controls intensify earnings management among sanctioned firms. Our channel analysis reveals that financial distress, cash flow volatility and internal control deficiency serve as key channels. Our cross-sectional analysis shows pronounced earnings management among firms with weaker external oversight and poorer internal corporate governance. Lastly, firms that resort to increased earnings management due to export controls tend to experience deteriorating profitability and slower sales growth in the long run. These findings shed light on firms' opportunistic accounting behavior in face of trade sanction and highlight the significance of external monitoring in improving accounting information quality.

Suggested Citation

  • Huang, Hengxuan & Liu, Suyi & Gong, Yuan & Yan, Zehao & Ge, Zhixiang, 2025. "Export control and earnings management: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 104(PB).
    • Handle: RePEc:eee:finana:v:104:y:2025:i:pb:s1057521925004284
    DOI: 10.1016/j.irfa.2025.104341
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    More about this item

    Keywords

    U.S. export controls; Earnings management; Cash flow volatility; Financial distress;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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