Abstract
Earnings management behaviour lowers the quality of accounting information of private enterprises to a certain extent. Hence, it is necessary to study the relationship between political connection and earnings management of private enterprises. Through the investigation and statistics of the private companies in China’s Small and Medium-sized Enterprise Board Market from 2013 to 2017, this paper performs empirical analysis to verify the relationship between political connection and earnings management. It shows that political connection can weaken accrual-based earnings management level, which helps private firms obtain more preferential policies and financing help. Based on the above conclusions, this paper puts forward the corresponding policy recommendations, which provide reference for the governance of private enterprises and the capital market.
Highlights
After the economic reform and opening in China, the development of private enterprises has become a vital force to promote national taxes, relieving social employment pressure, stabilizing social and economic operation (Wang et al, 2005)
From the result (2), we can see that political connection (PC) has a positive impact on real earnings management at a significant level of 1%
Based on the perspective of political connection, this paper studies the private listed companies in the Small and Medium Board from 2013 to 2017, and empirically analyzes the relationship between political connection and earnings management of private enterprises
Summary
After the economic reform and opening in China, the development of private enterprises has become a vital force to promote national taxes, relieving social employment pressure, stabilizing social and economic operation (Wang et al, 2005). As the development of the privately held company has a significant impact on the social economy and capital market, it is essential to study the impact of private enterprises' political connection on earnings management behaviour. This paper takes the private listed companies in small and medium-size as a sample to conduct an in-depth study. It tries to explore whether the political connection is related to the earnings management behaviour of private enterprises in the rapid development of private economy. This paper verifies the impact of government connection on earnings management behaviour through the combination of the theory and empirical analysis, which is of great significance for the development of private enterprises
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