Abstract
In this paper, we use the China-Hong Kong Stock Connects (the connects) as exogenous shocks of the liberalization of Chinese stock markets to examine the effects of the connects on firm earnings management. We find that the stock market liberalization of capital market significantly reduces firms’ earnings management. The decrease of asymmetric information is the underlying driving force behind our findings. Overall, this study provides policy implication that the stock market liberalization reduces the earnings management.
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