High-speed rail network and earnings management techniques usage trade-off: the moderating effects of governance and religion
ISSN: 0268-6902
Article publication date: 23 November 2023
Issue publication date: 15 January 2024
Abstract
Purpose
This study aims to investigate the impact of the development of high-speed rail (HSR) network on earnings management, especially on the trade-off between the usage of accruals-based earnings management (AM) and real earnings management (RM) techniques, and consequently, examines the extent to which the HSR network–earnings management nexus is moderated by governance and religion factors.
Design/methodology/approach
Using a sample of Chinese A-listed firms over an 11-year period, this study uses regression techniques as the baseline methodology while controlling for industry and year-fixed effects. The authors also use endogeneity tests (including instrumental variable method, Generalized Methods of Moments estimation and difference-in-difference) and different robustness checks.
Findings
The key findings are threefold. First, the HSR network development reduces AM. This suggests that the presence of HSR network is effective in reducing information asymmetry. Second, the use of RM technique increases with the HSR network development. This indicates that managers do not seem to engage in less earnings management with the HSR network development but instead appear to switch from the easy-to-detect AM to the more costly RM approach. Finally, the HSR network and earnings management nexus is moderated by governance and religion factors.
Originality/value
This study provides new evidence on the trade-off between AM and RM by managers and pioneers in examining the impacts of governance and religion factors on the relationship between the HSR network and the trade-off of earnings management techniques.
Keywords
Acknowledgements
Funding: Li Bin acknowledges the financial support from the National Social Science Foundation of China (Grant Number: 22BGL090).
Compliance with ethical standards:
Conflict of interest: All the authors declare that they have no conflict of interest.
Ethical approval: This article does not involve any studies with human participants or animals performed by any of the authors.
Data Availability Statement: Research data are not shared.
Citation
Li, B., Qizi, Z., Shahab, Y., Wu, X. and Ntim, C.G. (2024), "High-speed rail network and earnings management techniques usage trade-off: the moderating effects of governance and religion", Managerial Auditing Journal, Vol. 39 No. 1, pp. 26-49. https://doi.org/10.1108/MAJ-01-2023-3799
Publisher
:Emerald Publishing Limited
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