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Fiscal support and earnings management

He, G.

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It is well documented that firms tend to manipulate earnings before IPO (initial public offerings) and SEO (seasoned equity offerings). This study contributes to the literature by providing the first evidence on whether and how fiscal support in the form of preferential tax treatment and financial subsidy affects a firm's earnings management behaviors. Using data for Chinese firms that have conducted IPO and SEO, I find that firms have a lower level of earnings management prior to the offerings if they enjoy more preferential tax treatment or more financial subsidies from local governments. My results are consistent with the view that firms that receive stronger fiscal support have smaller demand for earnings management, which is a costly tool for a firm to achieve its desired earnings targets.

Journal Article Type Article
Acceptance Date Aug 19, 2015
Online Publication Date Jan 21, 2016
Publication Date Mar 1, 2016
Deposit Date Dec 5, 2017
Publicly Available Date Jan 21, 2018
Journal The International Journal of Accounting
Print ISSN 1094-4060
Publisher World Scientific Publishing
Peer Reviewed Peer Reviewed
Volume 51
Issue 1
Pages 57-84
Public URL


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