Abstract
AbstractThis study evaluates the quality of accounting information provided by Chinese multinational corporations (MNCs) in relation to the issue of earnings management. Using a combined dataset of outward foreign direct investment and financial statements by Chinese firms publicly listed on A‐share markets between 2012 and 2017, we investigate whether Chinese MNCs are more inclined to manage earnings. We discover that these firms exhibited significant earnings management behavior and typically adjusted their earnings downward. We demonstrate that these effects were more pronounced among private MNCs than state‐owned firms, and in host countries with weaker institutional quality. Further research reveals that after delaying the confirmation of current earnings, Chinese MNCs received higher government subsidies, and this pattern was particularly prevalent among private MNCs. We find no evidence that Chinese MNCs manipulated earnings to avoid paying taxes.
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