China Journal of Accounting Research最新文献

We aim to demystify digitalization in accounting (DIA) based on the case study of Ash Cloud, a digital factory in Shenzhen, China. From the perspective of dynamic capabilities, we develop the “momentum” theory of DIA to illustrate that firm and executive characteristics drive digital transformation and organizational capabilities. Ash Cloud’s CEO values and cultivates an organizational culture of transparency and openness, while the firm is characterized by cost pressures. Organizational capabilities shape digitalization in business processes and different approaches to DIA. Our findings suggest that the core competence of Ash Cloud is its capability for systems integration, which includes knowledge of redesign, reconfiguration and redefinition. Ash Cloud stands out because of its knowledge extending beyond the firm’s boundaries.

The macroeconomic policy environment affects the internal governance of microenterprises, which may provide opportunities for management to benefit from stock sales while decreasing its motivation to manipulate stock transactions. Using a sample of Chinese A-share listed companies from 2007 to 2018, we study the impact of macroeconomic policy uncertainty on opportunistic insider trading. The results show that macroeconomic policy uncertainty helps restrain the opportunistic trading of shares held by management. When macroeconomic policies are uncertain, enterprises improve their internal governance. Furthermore, strengthening equity governance helps reduce management’s opportunistic use of the uncertainty of the policy environment, highlighting the advantageous effect of macroeconomic policy uncertainty and helping regulators standardize managerial behavior and promote the governance effect of macroeconomic policy.

By manually collecting data on Internet-based rumors concerning COVID-19, we investigate the market reactions to the spread of such rumors and the government’s refutation of them. We find that frightening (reassuring) rumors have a negative (positive) impact on investors. The refutation of frightening rumors triggers a positive market response, whereas the refutation of reassuring rumors does not cause a significant market reaction. Further analysis shows that there is a stock price drift when frightening rumors are refuted by governments. Our conclusions remain robust after considering endogeneity. Our findings support the notion that epidemic-related rumors affect investors’ decisions, which add to literatures of the market responses of companies in the context of the COVID-19 pandemic and provide incremental evidence for the “the spiral of silence” theory.

As stock index adjustments comprise a basic system of capital market, their potential influence on analysts’ earnings forecasts is worthy of research. Based on a research sample of 23 adjustments to the CSI 300 Index from June 2007 to June 2018 and the backup stocks announced during the same period, this study examines the impact of additions to stock index on analysts’ forecast optimism using a staggered difference-in-differences model. The research results show that after stocks are added to the stock index, analysts’ earnings forecast optimism about these stocks increases significantly. Cross-sectional analysis indicates that this increase is more significant when the market is bullish, institutional ownership is low, the ratio of listed brokerage firms is low, star analyst coverage is low, firms show seasoned equity offering activity, the ratio of analysts from the top five brokerage firms ranked by commission income is high, and the analysts’ brokerage firms are shareholders. However, analyst-level tests find that analysts’ ability helps to reduce the impact of additions to stock index on earnings forecast optimism. Furthermore, additions to stock index significantly increase analyst coverage and forecast divergence. Economic consequences tests find additions to stock index significantly increases stock price synchronization, which is partly mediated by analysts’ earnings forecast optimism. This study enriches the literature on the impact of basic capital market systems and analyst behavior. The findings suggest that investors should rationally evaluate analysts’ earnings forecasts for stocks added to the stock index and obtain further information from various channels to improve asset allocation efficiency.

The mechanism by which enterprises set salaries is vitally important to employees and is especially relevant to the reform of state-owned enterprises (SOEs). This paper investigates the effect of comparing employee compensation based on a sample of A-share SOE groups from 2008 to 2018. We find that when employee compensation at one company sharply increases, the employee compensation of other companies controlled by the same group will increase sharply in the following year. Further analysis shows that when employees’ sense of unfair compensation is stronger, when employees are less replaceable and when enterprises’ ability to pay is stronger, the effect of employee pay comparison is stronger. Increased employee salary does not improve enterprise performance, however, suggesting that such salary adjustment is ineffective. This paper expands the research on employee compensation and provides useful insights for optimizing the design of compensation contracts and promoting compensation reform in SOEs.

This paper tests how market misvaluation affects corporate innovation. Unlike the “catering effect” observed in the US, we find that estimated stock overvaluation in China is strongly negatively associated with corporate innovation, conforming to our “risk-aversion” hypothesis. In China, misvaluation affects innovation via finance and management behavior channels. The effect is more significant in non-state-owned corporations than in state-owned corporations. Stock turnover rate and ownership concentration play moderating roles in the effect. The evidence sheds light on the relationship between market risks and corporate innovation in an emerging market.

Using panel data from 242 cities in China, we examine the impact of government research and development (R&D) spending on corporate technological innovation. We find that listed firms located in cities with higher government R&D expenditures are more innovative than firms in other cities. Further, the positive effect of government R&D spending depends on fiscal instruments and factor allocation. Through subsidies and tax incentives, government R&D spending enhances firm innovation by alleviating financing constraints, improving employee creativity and ensuring efficient operations. We demonstrate that subsidies are more effective than taxes in spurring corporate technological innovation. We also show that the impact of government R&D spending is stronger for state-owned and high-tech enterprises than for other enterprises. Overall, our findings suggest that government R&D spending can substantially improve corporate technological innovation through fiscal instruments.

This paper studies the effect of the standardization of the strategy translation process on procedural fairness in budgeting and firm performance. Analysis of 250 valid questionnaires using a structural equation model shows that the strategy translation process (STP) affects firm performance not only directly but also indirectly, through budget participation and procedural fairness in budgeting. This study enriches the literature on the economic consequences of strategic performance measurement systems and expands research on procedural fairness in budgeting and the factors influencing firm performance. This study shows that the standard translation and implementation of strategy will decrease managers’ bias in the target-setting process, thus increasing manager’s sense of fairness in the budget process and ultimately improving firm performance.

In 2007, China adopted the single balance sheet liability method for tax accounting, but its shortcomings have emerged. I sample A-share listed companies from 2007 to 2018 to study whether an abnormal change in deferred tax assets interferes with analysts’ earnings forecasts and find that an abnormal change in deferred tax assets increases the error and divergence of these forecasts. Compared with a negative abnormal change in deferred tax assets, a positive abnormal change has a greater impact on earnings forecasts. Additionally, the level of corporate governance, audit quality and analysts’ professional ability have moderating effects on the correlation between an abnormal change in deferred tax assets and earnings forecasts. However, an abnormal change in deferred tax liabilities does not have a significant impact on that correlation.

Labor protection increases employees’ stability and strengthens their monitoring role, improving firms’ information environment and increasing analysts’ earnings forecast accuracy. Using the implementation of China’s Labor Contract Law as a quasi-natural experiment, we find that labor protection significantly improves analyst forecasts. This positive impact is stronger when agency problems are weaker, board independence is greater, corporate reputation is better and industry competition is more intense. Enhanced labor protection significantly reduces firms’ business risk and accrual-based earnings management, decreases stock price synchronicity and increases market pricing efficiency. Our findings of significant impacts of China’s Labor Contract Law on analysts’ forecasting behaviors offer important guidance for promoting the development of the Chinese capital market and policy making in labor protection.