Quality of reported earnings by Chinese firms: The influence of ownership structure

Wei Xu, Kun Wang, Asokan Anandarajan

Research output: Contribution to journalArticlepeer-review

17 Scopus citations


This paper examines the influence of ownership structure on earnings quality of firms listed on the Chinese Stock Exchanges. We empirically test four contemporary earnings quality measures, including volatility of earnings, variability of earnings over cash flows, correlations between accruals and cash flows, and level of discretionary accruals, for 1438 firms listed on Shenzhen Stock Exchange and Shanghai Stock Exchange. We find that although state-owned firms are bigger in size and appear more profitable based on reported earnings; privately-owned firms, foreign-owned firms and society-owned firms outperform the state-controlled firms in earnings quality; and foreign-owned firms have the highest earnings quality among all types of ownership groups. We find that there is not much difference in earnings quality between collectively-owned firms and state-owned firms and employee-owned firms exercise least discretion in earnings management. The findings in particular will have direct policy implications for the China Securities Regulatory Committee (CSRC).

Original languageEnglish (US)
Pages (from-to)193-199
Number of pages7
JournalAdvances in Accounting
Issue number1
StatePublished - Jun 2012

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance


  • Chinese firms
  • Earnings quality
  • Ownership structure


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