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How does carbon emissions trading policy affect accrued earnings management in corporations? Evidence from China

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  • Long, Wenbin
  • Qu, Xin
  • Yin, Saifeng

Abstract

This paper examines the impact of carbon emissions trading scheme (ETS) on firms’ accrued earnings management. Based on Chinese A-share listed firms from 2008 to 2020, we find that emission-regulated firms significantly engage in accrued earnings management after implementing ETS. The impact is strengthened for firms with a lower cost pass-through ability and firms with a higher carbon emissions intensity. The results from mechanism analysis support that firms are motivated to manage earnings by the compliance costs and carbon risks associated with the new environmental regulation. Insights are provided into the potential downside consequence of the carbon emission trading policy.

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  • Long, Wenbin & Qu, Xin & Yin, Saifeng, 2023. "How does carbon emissions trading policy affect accrued earnings management in corporations? Evidence from China," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002131
    DOI: 10.1016/j.frl.2023.103840
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    Cited by:

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    9. Wang, Xing & Li, Pengyu & Yuan, Yangguang & Zhang, Qianxiang, 2025. "The impact of the carbon trading market on corporate employment: Theoretical and empirical evidence," Energy, Elsevier, vol. 320(C).
    10. Wei Chen & Yuan Tian, 2024. "The Unintended Consequence of Environmental Regulations on Earnings Management: Evidence from Emissions Trading Scheme in China," Sustainability, MDPI, vol. 16(16), pages 1-21, August.
    11. Van Thi Thuy Vu & Khanh Hoang & Toan Luu Duc Huynh, 2025. "Carbon Transition Risk, Emissions Trading Schemes, and Firm Performance: International Evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(2), pages 1297-1314, March.
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