Research on the influence of online media reports on earnings management based on the perspective on abnormal investor attention

Abstract

PurposeThis paper aims to discuss whether the attention of investors to abnormalities can serve as a mechanism for the influence of online media coverage on earnings management.Design/methodology/approachBased on Baidu index data of China’s A-share listed companies between 2014 and 2018, this paper studies influencing mechanism of online media reports on earnings management from the perspective on abnormal investor attention.FindingsThe results show that internet media reports can impose pressure on managers of companies by inducing abnormal focus of the public on listed companies and further force the latter to generate more actions on the management of earnings. It is the abnormal rather than normal investor attention that mediates network media reports and earnings management.Practical implicationsThis research enriches and refines the theory on influencing mechanism of media effects on earnings management and provides significant empirical evidence for future researches. Meanwhile, the conclusion of the research is of great practical importance for instructing listed firms dealing with media reports, guiding rational investment of investors and intensifying precision regulation of regulators.Originality/valueBy categorizing abnormal investor attention into active spontaneous abnormal attention which is not guided by media report and passive guided abnormal attention which is guided by media reports, the authors clarify the difference between the two categories. The result indicates that it is only the latter that is the influential mechanism of media report on earnings management.