China Journal of Accounting Research最新文献

This study shows that a decline in investment efficiency due to information asymmetry may not necessarily devalue a firm but may enhance its value instead. Firms base their investment decisions on both public and private information. However, effectively transmitting private information to investors in a competitive market is quite challenging, as it leads to stock prices inadequately reflecting a firm’s true value. Simultaneously, firms must invest to achieve their business objectives, which results in a deviation between a firm’s actual investment level and the market’s expected investment level, thereby reducing investment-q sensitivity. However, this deviation does not imply a waste of societal resources; instead, it improves a firm’s core competitiveness in the product market. We consider the future launch of new products as a proxy for firm private information. We find that (1) private information is negatively associated with investment-q sensitivity, and that the greater the sales of the new product, the lower the investment-q sensitivity; (2) the negative effect is more pronounced for firms with higher revenue volatility and ownership concentration than for those with lower revenue volatility and ownership concentration. This study helps us to further understand how to evaluate firm investment efficiency from the perspective of private information and provides empirical evidence of the costs of the new product launch process.

Against the background of China’s strengthening of finance and accounting supervision, this study examines the practice among listed companies of changing signing auditors at the last minute and explores whether Chinese investors can capture this information in a timely manner. We find that China’s capital market responds significantly negatively to these last-minute changes, implying that investors perceive a potential negative impact of this behavior. Cross-sectional analyses suggest that the characteristics of the change event, recent corporate events, and accounting firm capability significantly affect the stock price response. Furthermore, in terms of the individual characteristics of signing auditors, external investors appear to comprehensively consider busyness level, industry experience, and the timing of the change to determine the causes and effects of the auditor change and make different market reactions accordingly. In addition, consistent with investor perceptions, we find that last-minute changes significantly impair the quality of financial statements, indicating that external investors’ judgments based on information about changes in signing auditors are rational and effective.

Whether registration system reform (RSR) can curb administrative intervention and create a fair market environment has long been a concern in China. We explore this issue from the perspective of the initial public offering (IPO) preference based on the entropy balancing method, and findings are as follows. First, an IPO ownership preference exists under approval system. That is, state-owned enterprises (SOEs) are more likely than private enterprises to obtain IPO approval. However, RSR significantly changes this preference, especially for non-politically connected private enterprises. Second, the post-IPO market performance of SOEs is inferior to that of private enterprises under approval system, thus excluding the view that approval is prioritized for SOEs because of superior performance. Third, compared with SOEs, private enterprises are more likely to switch the issuance system from approval system to registration system; this change makes it easier for them to obtain IPO approval, indicating that private enterprise owners perceive the registration channel to be fairer. Fourth, the effect of RSR on IPO ownership preference mainly occurs in companies in three major urban agglomerations in China—the Pearl River Delta, the Yangtze River Delta, and the Beijing–Tianjin–Hebei region—and in technology-intensive industries. Collectively, our findings reveal that RSR cultivates a fairer IPO approval process.

Corporate mergers and acquisitions (M&As) are subject to skewed logic due to excessive government regulation. China is progressively adopting the Market Access Negative List (MANL) pilot to transfer the power of resource allocation from the government to the market. Using the DID method, we examine the impact of relaxing market access regulation on firms’ M&A behavior against China’s institutional background and the M&A events of listed companies from 2012 to 2019. The MANL significantly increases firms’ M&A tendency and amount and strengthens the competitive adequacy and fairness of market-oriented M&A decisions. Post-M&A financial performance does not increase, but human capital productivity, innovation effectiveness and total factor productivity do, demonstrating the dynamic balance of profit and efficiency in M&As.

The deep integration of digital technology with the real economy has reconstructed production systems. We explore the impact of digital technology on the resource allocation behavior and efficiency of manufacturing enterprises. Using a sample of Chinese A-share listed manufacturing firms over the 2010–2021 period, we find that digital technology alleviates cost stickiness, especially in enterprises with a high level of Industrial Internet platform usage. This effect occurs by optimizing the labor force structure and improving the economic benefits of labor capital investment. Heterogeneity analysis shows that this effect is pronounced in enterprises with high levels of labor intensity and business complexity. Our findings shed new light on the consequences and mechanism of enterprise cost optimization that is driven by technology-driven reforms.

This paper considers stock halts to study the impact of stock liquidity loss on the managerial learning effect based on stock prices. We examine stock halts’ impact on corporate innovation and find that discretionary halts hinder innovation. We also find that discretionary halts reduce information quality and increase financial constraints and agent costs. Cross-sectional tests show that this negative impact is more pronounced in samples with high shareholding ratios by large shareholders, institutional investors and private firms. The results indicate that the loss of non-institutional stock trading rights, represented by discretionary stock halts, affects revelatory price efficiency in the secondary market, hinders managers’ learning effect and affects enterprises’ production and operation decisions. These findings have policy implications for stock circulation-right protection and Chinese capital-market reform.

Based on upper echelons theory and using a sample of private Chinese A-share listed firms from 2008 to 2020, this paper studies the impact of executives’ overseas experience on firms’ labor investment efficiency. The results show that executives with overseas experience significantly enhance firms’ labor investment efficiency. After distinguishing between different types of overseas experience, the results show that executives with only study experience or with both study and work experience abroad have a significant positive effect on firms’ labor investment efficiency, while executives with only overseas work experience have no significant effect. A cross-sectional analysis based on labor adjustment costs shows that the positive impact of executives’ overseas experience is more pronounced in labor-intensive firms, firms with a greater proportion of R&D investment and firms with a higher percentage of highly educated employees. The mechanism tests show that executives with overseas experience can optimize labor investment efficiency by lowering agency costs, attracting analyst attention and alleviating financing constraints under conditions of underemployment. This study enriches the literature on the characteristics of executive teams and the efficiency of labor investment, providing reference and inspiration for firms to attract more high-quality returnees and optimize their labor resource allocation.

This study examines how corporate board features and auditor characteristics in Bangladesh influence the disclosure of key audit matters (KAM) in annual reports from 2018 to 2021. Using ordinary least squares (OLS) regressions, the study finds that factors such as chair gender, the presence of women on the board, audit committee (AC) size, auditor tenure, and client-auditor relationship significantly affect KAM disclosure. However, AC expertise, family CEO succession, and board political connections do not have significant effects. Notably, having a family member CEO with a long-tenured auditor has a negative association with KAM disclosure, while a politically connected family CEO has a positive association with such disclosures. Additionally, Big-4 auditors of important clients are negatively associated with KAM disclosure.

This study employs the Mainland-Hong Kong Stock Connect pilot program in China to investigate the influence of stock market liberalization on firm-level financial reporting quality (FRQ). First, through a staggered difference-in-difference specification strategy, we find that eligible firms experience a significant improvement in FRQ, as measured by a composite proxy of accrual earnings management, real activities manipulation, and financial report restatement. Second, cross-sectional analyses suggest that the effect is stronger when firms are headquartered in regions with weaker institutional environments, characterized by lower judicial efficiency and less developed financial markets. We also show that the impact is more pronounced when firms face less external pressure and possess more effective corporate governance before stock market liberalization. Third, further evidence highlights that augmented FRQ is associated with a reduction in regulatory compliance costs, an improvement in stock price efficiency, and a mitigation of financing constraints. Collectively, we shed new light on the role of stock market liberalization in shaping firms’ financial reporting behavior.

I show that the disclosure of mutual funds’ holdings significantly affects investors’ investment decisions. As most mutual fund websites, advertisements, and fund-trading platforms only disclose a fund’s 10 largest holdings (top-10), this study finds that investors disproportionately focus on these stocks. However, this bias does not lead to additional profit because relative to their peers, funds with good top-10 performance tend to generate poor long-term returns. I design a clean and innovative discontinuity test between the performance of the 10th and 11th portfolio holdings to examine such window dressing behavior. I find that relative to their peers, funds that are small, new, and highly active are more likely to window dress and incur greater costs if they suffer from severe capital outflows. My findings suggest that partial disclosure misleads investors and allows effective window dressing.