Does corporate culture matter to earnings management? Evidence from Chinese Time‐honoured Brand firms

Abstract

AbstractThis paper focuses on the earnings management and the culture of China Time‐honoured Brand. It shows that the accrual earnings management and real earnings management of China Time‐honoured Brand are significantly lower than other enterprises. The transmission mechanism between culture and corporate earnings management comes from the executives' culture infiltration. Property rights and incentive compatibility have significant moderating effect on the relationship between China Time‐honoured Brand and earnings management. From the quantitative point of view, this paper supplements the function of China Time‐honoured Brand culture in overcoming the problem of corporate information distortion and points out also the transmission mechanism and adjustment factors. On the one hand, it helps to deepen the understanding of the cultural factor and corporate financial behaviour, and on the other hand, it provides the direct evidence about the influence of Chinese excellent traditional culture to the small companies. The article helps to understand the relationship between traditional culture, corporate culture and corporate financial behaviour and its mechanism of action, which has an important practical significance.