Abstract
AbstractThis paper investigates how state ownership affects financial reporting practices in China. Using several measures of state (government) ownership, we show that a one‐standard‐deviation increase in state ownership decreases financial statement comparability by 36.61%, and the impact is more pronounced when the central authority has majority control of the company. Moreover, lower earnings quality and lower levels of accounting conservatism among state‐owned enterprises (SOEs) may explain the lower accounting comparability between SOEs and non‐SOEs (NSOEs). Additionally, similar (different) managerial objectives converge (diverge) financial statement comparability between SOEs and NSOEs. Last, the geographical locations of firms also contribute to financial statement comparability. We employ a difference‐in‐differences design, changes regression and entropy balancing to mitigate potential endogeneity bias.
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