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Durham Research Online
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Fiscal support and earnings management.

He, G. (2016) 'Fiscal support and earnings management.', International journal of accounting., 51 (1). pp. 57-84.


It is well documented that firms tend to manipulate earnings before IPO (initial public offerings) and SEO (seasoned equity offerings). This study contributes to the literature by providing the first evidence on whether and how fiscal support in the form of preferential tax treatment and financial subsidy affects a firm's earnings management behaviors. Using data for Chinese firms that have conducted IPO and SEO, I find that firms have a lower level of earnings management prior to the offerings if they enjoy more preferential tax treatment or more financial subsidies from local governments. My results are consistent with the view that firms that receive stronger fiscal support have smaller demand for earnings management, which is a costly tool for a firm to achieve its desired earnings targets.

Item Type:Article
Full text:(AM) Accepted Manuscript
Available under License - Creative Commons Attribution Non-commercial No Derivatives.
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Publisher statement:© 2016 This manuscript version is made available under the CC-BY-NC-ND 4.0 license
Date accepted:19 August 2015
Date deposited:05 December 2017
Date of first online publication:21 January 2016
Date first made open access:05 December 2017

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