Institutional investors’ intervention in information asymmetry and real earnings management within dual-class and single-class Chinese US-listed firms / Yang Xiaoyu ... [et al.]

• Main Authors: Yang, Xiaoyu, Ong, Tze San, Mohd Nor, Normaziah, Soh, Wei Ni
• Format: Article
• Language: English
• Published: Accounting Research Institute (ARI), Universiti Teknologi MARA, Shah Alam 2024
• Subjects: Earnings management; Information technology. Information systems
• Online Access: https://ir.uitm.edu.my/id/eprint/103382/1/103382.pdf; https://ir.uitm.edu.my/id/eprint/103382/
• Institution: Universiti Teknologi Mara

This study aimed to empirically analyse the relationship between information asymmetry and real earnings management in Chinese firms, while also investigating the moderating effect of institutional investors. The study employed a dataset consisting of 105 dual-class and 121 single-class Chinese companies that were listed in the United States from 2017 to 2021. The study utilised panel data and employed a fixed effects model. The study depicted a positive connection between information asymmetry and real earnings management. This correlation remained present in dual-class companies but lacked statistical significance in single-class companies. The results suggested that institutional investors mitigated the influence of information asymmetry on real earnings manipulation. This moderating effect was especially significant in dual-class structures but not in single-class structures. The findings indicated that management should prioritise enhancing information transparency to mitigate the risks linked to real earnings management. The results also suggested that involving institutional investors effectively decreased the risk of earnings manipulation. Furthermore, the study provided important evidence of Chinese companies' real earnings management behaviour, allowing stakeholders to make informed decisions. Furthermore, this study provided new empirical insights that may be useful for emerging economies, including China, as they consider the adoption of dual-class share structures.