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Cat-and-mouse game: China’s new delisting regulations and corporate earnings management strategies

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  • Diao, Mengxin

Abstract

This study examines the impact of new delisting regulations on the choice of corporate earnings management tools, using a natural experiment in the context of China’s delisting system reform. The results indicate that the new delisting regulations reduce accrual-based earnings management while increasing real earnings management among listed companies. This change can be partly attributed to the alleviation of principal-agent problems and improvements in information disclosure quality. Furthermore, the impact of the new delisting regulations is more pronounced in companies with a low ratio of independent directors, high financing constraints, and low management shareholding. In companies exhibiting excessive management confidence, the new regulations more strongly drive real earnings management. Overall, this study provides important policy implications; specifically, the new delisting regulations reduce accrual-based earnings management but induce real earnings management.

Suggested Citation

  • Diao, Mengxin, 2025. "Cat-and-mouse game: China’s new delisting regulations and corporate earnings management strategies," Finance Research Letters, Elsevier, vol. 85(PC).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pc:s1544612325013364
    DOI: 10.1016/j.frl.2025.108079
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