COVID-19 and earnings management: a comparison between Chinese family and non-family enterprises

Rahman, Md Jahidur, Ding, Jinru, Hossain, Md Moazzem, and Khan, Eijaz Ahmed (2023) COVID-19 and earnings management: a comparison between Chinese family and non-family enterprises. Journal of Family Business Management, 13 (2). pp. 229-246.

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Purpose The main objective of this study is to examine the impact of the COVID-19 pandemic on earnings management practices in China using a sample of family and non-family enterprises. More specifically, this study aims to examine whether the COVID-19 pandemic causes variation in Chinese listed family and non-family enterprises' operations, as reflected in the level of real earnings management (REM).

Design/methodology/approach This study uses three standardised REM indicators, namely, the abnormal level of cash flows from operations, the abnormal level of production costs and the abnormal level of discretionary expenses. Ordinary least squares (OLS) regressions are applied to compare the earnings management of Chinese family and non-family enterprises during the pre-pandemic period (2017–2019) and the pandemic period (2020).

Findings The authors find that Chinese listed non-family enterprises tend to participate in more REM activities than family enterprises before the COVID-19 outbreak. However, the opposite is true during the pandemic. The authors also find that COVID-19 has increased the involvement of family and non-family enterprises in REM activities.

Originality/value The results of previous studies based on REM using Chinese listed firms may not be applicable under the new social background of COVID-19. As the period after the COVID-19 outbreak is relatively recent, Chinese researchers have yet to study it comprehensively. The present study is amongst the first empirical attempts investigating the effect of a pandemic financial reporting by investigating whether and how the burst of the COVID-19 crisis affected financial reporting through the earnings management practices of listed Chinese family and non-family enterprises. Such information is crucial because it can provide analysis for all stakeholders to make better decisions.

Item ID: 76658
Item Type: Article (Research - C1)
ISSN: 2043-6246
Keywords: COVID-19, Real earnings management, Family enterprises, Non-family enterprises, China
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Copyright Information: © Emerald Publishing Limited.
Date Deposited: 06 Dec 2022 02:54
FoR Codes: 35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3507 Strategy, management and organisational behaviour > 350704 Entrepreneurship @ 100%
SEO Codes: 15 ECONOMIC FRAMEWORK > 1503 Management and productivity > 150302 Management @ 100%
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