Corporate Governance and Earnings Quality: Evidence from China

The IUP Journal of Corporate Governance, Vol. XVII, No. 1, April 2018, pp. 7-35

Posted: 10 Oct 2018

See all articles by Zabihollah Rezaee

Zabihollah Rezaee

University of Memphis - School of Accountancy

Huili Zhang

Beijing Normal University (BNU)

Huan Dou

Jinan University

Minghua Gao

Beijing Normal University (BNU)

Date Written: April 28, 2018

Abstract

The present paper examines the association between corporate governance and earnings quality using the Corporate Governance in Finance (CGF) Index in China. Using a sample of 4,455 Chinese firms for fiscal years 2012 and 2014, the paper finds that firms with a higher CGF Index and more effective internal control have higher earnings response coefficients, their earnings are more persistent and more predictable in determining future cash flow, and they engage less in accrual and real earnings management activities. The paper suggests that earnings quality for the sample of Chinese firms is linked to corporate governance and internal control measures, which has implications for firms in other emerging markets.

Suggested Citation

Rezaee, Zabihollah and Zhang, Huili and Dou, Huan and Gao, Minghua, Corporate Governance and Earnings Quality: Evidence from China (April 28, 2018). The IUP Journal of Corporate Governance, Vol. XVII, No. 1, April 2018, pp. 7-35. Available at SSRN: https://ssrn.com/abstract=3256624

Zabihollah Rezaee (Contact Author)

University of Memphis - School of Accountancy ( email )

Fogelman College of Business and Economics
Memphis, TN 38152-6460
United States
901-678-4652 (Phone)

Huili Zhang

Beijing Normal University (BNU) ( email )

19 Xinjiekou Outer St
Haidian District
Beijing, Guangdong 100875
China

Huan Dou

Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

Minghua Gao

Beijing Normal University (BNU) ( email )

19 Xinjiekou Outer St
Haidian District
Beijing, Guangdong 100875
China

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