Can media deter management from manipulating earnings? Evidence from China
This study examines the influence of media exposure on managers’ earnings management behavior using China’s publicly traded firms during 2001–2009. We find that firms with more media exposure (both negative and non-negative) manage their earnings less than firms with less media exposure. We also find that “suspect firms” (being specially treated or with refinancing plans like seasoned equity offerings or right offerings) with more media exposure engage in more accrual-based earnings management relative to other firms. These results suggest that Chinese media serve as an external monitor to the majority of firms and place excessive pressure on suspect firms. This paper contributes incrementally to the literature by emphasizing the conflicting role media exposure plays in managerial decisions in earnings management. The findings of this study have practical implications for regulators, auditors, financial analysts, as well as other information intermediaries.
KeywordsEarnings management Media exposure Corporate governance
This research is supported by National Natural Science Foundation of China (71102095): Choice of earnings management and its impact on economic consequences: an analysis based on accounting flexibility. The second author is grateful for the financial support from Saunders College of Business at Rochester Institute of Technology.
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