| Summary: | This paper aims to investigate the earning management activities in
Chinese listed firms where capital market, ownership structure and
motivations to manipulate profits that are different from other countries.
Specifically, it will attempt to examine the impact of the Split Share
Structure reform on earning management and audit quality in China,
where, the research investigating the effect of split share structure reform
on audit quality is limited. The main difference that distinguished the
Chinese market from other stock markets was the establishment of twotier
share structure divided into tradable and non-tradable shares.
However, the dominance of non-tradable shares led to ineffective
functioning of Chinese stock market, which accelerated incentives to
earning management. After the split share reform, it is said corporate
structure and earning quality of firms’ has improved. However, other
authors have the opposite opinion. This study examines 1) the effect of
split share reform on accruals from share nature (tradable and nontradable)
perspective across three time periods; 2) and monitors the
impact split share reform on audit quality.
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