Graduation Year

2017

Date of Submission

4-2017

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Second Department

Economics-Accounting

Reader 1

George Batta

Rights Information

© 2017 Mingda Liu

Abstract

The Chinese economy went through significant reforms in the past few decades but remains highly politicized to this day. The financial reporting environment is also predominantly opaque, being correlated with low accounting quality of firms. A key measure to observe is earnings quality. I test and compare the earnings smoothing, managing towards targets, and timely loss recognition earnings management behaviors between politically connected and unconnected firms listed in China. Based on the empirical results, I find that the politically connected firms engage in a higher degree of earnings management and thus have lower earnings quality.

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