Abstract
Based on 2008-2016 years’ A-Share Listed Companies in China, using the capital market to lift the short selling constraints, this paper investigates its impact on the company’s provision for asset impairment. The study found that the lifting of short selling constraints policy led to a significant decrease in the asset impairment provision ratio. And the significance of the company’s provision for reducing the amount of assets that can be reversed is higher than the provision for impairment of non-reversible assets. The article extends the research framework of economic consequences of lifting short selling constraints, and supplements the literature on the factors that affect the company’s provision for asset impairment.
Highlights
China’s capital market has been loosening stock short selling controls since March 2010, and qualified investors can short-sell transactions on stocks that enter the short-selling list
We propose the second hypothesis of this paper: H2: After relaxing short selling control, the significance of the company will reduce the provision for impairment of assets that can be reversed is higher than the provision for impairment of non-returnable assets
After controlling for other factors affecting the proportion of asset impairment provision, the implementation of the loose short-selling control policy has significantly reduced the company’s asset impairment provision ratio, which is consistent with the expectation of Hypothesis 1
Summary
China’s capital market has been loosening stock short selling controls since March 2010, and qualified investors can short-sell transactions on stocks that enter the short-selling list. Can the relaxation of short selling control affect the accrual behavior of its asset impairment by reducing the company’s earnings management level? This paper takes the listed company’s provision for asset impairment as an entry point, and analyzes and tests how the short selling mechanism affects the company’s accounting policy choices. The article links the innovation of the stock trading system with the company’s important financial activities, and expands the framework of the short-selling mechanism for the company’s financial behavior research. It supplements the research literature on asset impairment. The second chapter is literature review and research hypothesis, the third chapter is research design, the fourth chapter is analysis of empirical results, and the fifth chapter is conclusion
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