Does external finance pressure affect corporate disclosure of Chinese non-state-owned enterprises?

Youchao Tan, Zhenmei Zhu, Cheng Zeng, Minghua Gao

Research output: Contribution to journalArticlepeer-review


We examine whether external finance pressure influences information disclosure of Chinese non-state-owned enterprises (NSOEs), which are often entrepreneurial firms. Existing Chinese stock exchange regulations stipulate that firms need to meet certain earnings performance criteria to qualify for rights issue or avoid delisting. These regulatory criteria create pressures for firms in need for external equity financing to manipulate earnings in order to meet and beat the performance targets. To examine this, we exploit an exogenous event of Chinese accounting standards change in 2007, when firms are given greater accounting disclosure discretion. Following this change, we find evidence consistent with increased earnings manipulation among NSOEs that barely meet these performance targets. This effect is also more pronounced among such NSOEs with weaker political connections, which increases their dependence on the capital market for external financing. Our findings have policy implications for the financing of NSOEs and entrepreneurial firms in emerging economies. © 2014 Elsevier Inc. All rights reserved.
Original languageEnglish
JournalInternational Review of Financial Analysis
Publication statusPublished - 2014


  • China
  • Delisting
  • Earnings manipulation
  • Non-state-owned enterprises
  • Political connection


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