【经管院每周系列讲座第328期】Government Anti-Corruption and Accounting Information Quality: Evidence from Quasi-Natural Experiments in China
Title:Government Anti-Corruption and Accounting Information Quality: Evidence from Quasi-Natural Experiments in China
Speaker:Dengjin Zheng,Central University of Finance and Economics
Host:Lin Liao, associate professor,SWUFE
Time:14:00-15:30,November 10, 2017
Venue:H503,Yide building, Liulin Campus
Abstract：This study uses a more direct measure of corruption and quasi-natural experiments to investigate the impact of government anti-corruption campaigns on accounting information quality of listed firms in China. We focus on municipal-level top government officials that are corrupt (corrupt officials) and their affiliated firms, i.e., listed firms operating in the jurisdiction of corrupt officials. As the arrests of corrupt officials occur as shocks to the public, we treat these events as quasi-natural experiments. We argue that listed firms affiliated with corrupt officials that have top positions in the municipalities have low incentives to provide high quality accounting information before the investigation of these officials, and supply higher quality of accounting after the event. Using a difference-in-difference method and a propensity score matching approach for the control firms, we show that accounting quality of affiliated firms is higher after the arrest of corrupt officials than before the event, compared to control firms. The increase in accounting quality is greater when corrupt officials have more power and affiliated firms have stronger political connections. Finally, we examine the channels affiliated firms use to improve accounting quality and find that they switch to higher quality auditors, have better internal control, and issue more management forecasts.