Abstract
Using the Shanghai-Hong Kong Stock Connect (SHHKConnect) as an exogenous shock, this paper investigates the impact of stock market liberalization on earnings management in China. By employing the propensity score matching difference-in-difference (PSM-DID) method, we find that the implementation of the SHHKConnect could lower the extent of earnings management for connected firms. The robustness check is conducted and valid. Our study contributes to a deeper understanding of the economic consequences of stock market liberalization and thereby providing implications for policymakers.
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