Effects of Audit Quality on Earnings Management and Cost of Equity Capital: Evidence from ChinalSUPg†l/SUPg

@inproceedings{Chen2011EffectsOA,
  title={Effects of Audit Quality on Earnings Management and Cost of Equity Capital: Evidence from ChinalSUPg†l/SUPg},
  author={Hanwen Chen and John Z. Ming Chen and Gerald J. Lobo and Yanyan Wang},
  year={2011}
}
We examine the effects of audit quality on earnings management and cost of equity capital for two groups of Chinese firms: state-owned enterprises (SOEs) and non-state-owned enterprises (NSOEs). The differences in the nature of the ownership, agency relations and bankruptcy risks lead SOEs to have weaker incentives than NSOEs to engage in earnings management. As a result, the effect of audit quality in reducing earnings management will be greater for NSOEs than for SOEs. In addition, investors… CONTINUE READING

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