Media Conglomeration and Earnings Management: Evidence from China

Abstract

This study examines the effect of local media conglomeration on corporate earnings manipulation in China. Using Chinese government’s conglomeration reform, we find that the product specialization in newspaper market reduce corporate earnings manipulation. The exit of unofficial newspapers and stable policy environment further strengthen this effect. The mechanism analysis reveals that media conglomeration fosters improvements in investment efficiency and firm productivity, discouraging manipulation through this enhanced performance. This effect is particularly pronounced for firms located in western regions or those in monopolistic industries. Our findings offer valuable insights in the consequences of commercialization and liberalization of information environment.

Keywords: Local newspapers, media conglomeration, earnings management.