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Earnings management and agency costs: Is China different?
Author(s) -
Man Yimei
Publication year - 2021
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.22481
Subject(s) - endogeneity , spurious relationship , earnings management , china , agency cost , corporate governance , agency (philosophy) , earnings , economics , accounting , business , econometrics , finance , political science , computer science , philosophy , epistemology , law , shareholder , machine learning
In this article, we investigate the link between agency costs (AC) and earnings management (EM) in China. We find a significant and positive relationship between AC and EM based on the static model that suggests opportunistic EM in China. However, we find an insignificant relationship between AC and EM when we use the dynamic model that takes into account the endogeneity issue. Therefore, our results provide further support to the growing literature on the concerns of endogeneity issues in corporate governance studies, since failing to take these into account can lead to spurious results.