TY - JOUR
T1 - Investor legal protection and earnings management
T2 - A study of Chinese H-shares and Hong Kong shares
AU - Fung, Simon Yu Kit
AU - Su, Lixin Nancy
AU - Gul, Reza Jashen
PY - 2013/9
Y1 - 2013/9
N2 - Under the unique "one country, two systems" arrangement, the more stringent investor protection rules in Hong Kong are not enforceable in firms that are incorporated in China but listed on the Hong Kong stock exchange (H-shares). As such, H-shares and other local Hong Kong firms are subject to different investor protection regimes in the same stock market. We find that H-shares are associated with higher earnings management than local Hong Kong firms after controlling for disparity in economic development, types of controlling shareholders and other factors. More importantly, this relationship is weaker after China implemented the Securities Law in 1999. The results are robust after considering the dual-listing status of H-shares and board characteristics. These results provide direct evidence showing the effect of investor legal protection on financial reporting quality.
AB - Under the unique "one country, two systems" arrangement, the more stringent investor protection rules in Hong Kong are not enforceable in firms that are incorporated in China but listed on the Hong Kong stock exchange (H-shares). As such, H-shares and other local Hong Kong firms are subject to different investor protection regimes in the same stock market. We find that H-shares are associated with higher earnings management than local Hong Kong firms after controlling for disparity in economic development, types of controlling shareholders and other factors. More importantly, this relationship is weaker after China implemented the Securities Law in 1999. The results are robust after considering the dual-listing status of H-shares and board characteristics. These results provide direct evidence showing the effect of investor legal protection on financial reporting quality.
UR - http://www.scopus.com/inward/record.url?scp=84882833827&partnerID=8YFLogxK
U2 - 10.1016/j.jaccpubpol.2013.06.004
DO - 10.1016/j.jaccpubpol.2013.06.004
M3 - Journal article
AN - SCOPUS:84882833827
SN - 0278-4254
VL - 32
SP - 392
EP - 409
JO - Journal of Accounting and Public Policy
JF - Journal of Accounting and Public Policy
IS - 5
ER -
