Effects of corporate ownership structure on earnings conservatism: evidence from China

Article

Kung, Fan-Hua, Cheng, Chia-Ling and James, Kieran. 2010. "Effects of corporate ownership structure on earnings conservatism: evidence from China." Asian Journal of Finance and Accounting. 2 (1), pp. 47-67. https://doi.org/10.5296/ajfa.v2i1.431
Article Title

Effects of corporate ownership structure on earnings conservatism: evidence from China

ERA Journal ID41493
Article CategoryArticle
AuthorsKung, Fan-Hua (Author), Cheng, Chia-Ling (Author) and James, Kieran (Author)
EditorsWickremasinghe, Guneratne
Journal TitleAsian Journal of Finance and Accounting
Journal Citation2 (1), pp. 47-67
Number of Pages21
Year2010
Place of PublicationUnited States
ISSN1946-052X
Digital Object Identifier (DOI)https://doi.org/10.5296/ajfa.v2i1.431
Web Address (URL)https://www.macrothink.org/journal/index.php/ajfa/article/view/431
Abstract

This paper investigates the incremental effects of corporate ownership structure on earnings conservatism, examining data of Chinese listed companies. We employ the concept of conditional conservatism to define earnings conservatism and adopt empirical models developed by Basu (1997) and Ball and Shivakumar (2005) to measure the degree of earnings conservatism. Our empirical results show that the earnings of companies with higher non-tradable shares have lower earnings conservatism. Consistent with prior studies, this point demonstrates that the companies with state and concentrated ownership structures are more likely to depend on private communication to reduce information asymmetry and to resolve agency problems internally, thereby creating a low demand for earnings conservatism. The results of this study contribute to our understanding of how companies’ ownership structures affect the properties of earnings in emerging markets and post-Communist markets.

Keywordsearnings conservatism; non-tradable shares; ownership structure; post-Communist studies; split-share structure; state ownership
ANZSRC Field of Research 2020350103. Financial accounting
441004. Social change
350102. Auditing and accountability
350101. Accounting theory and standards
350104. International accounting
Byline AffiliationsTamkang University, Taiwan
Fu Jen Catholic University, Taiwan
School of Accounting, Economics and Finance
Institution of OriginUniversity of Southern Queensland
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