How the 2007 global financial crisis changed the financial disclosure behavior

Jian (Jerry) Liang (Department of Finance, Faculty of Business and Law, Deakin University, Burwood, Australia)
Zhi Dong (Department of Property, The University of Auckland Business School, University of Auckland, Auckland, New Zealand)

Property Management

ISSN: 0263-7472

Publication date: 16 April 2018



The purpose of this paper is to investigate how the 2007 global financial crisis (GFC) changed financial disclosure behavior using a sample of US equity real estate investment trusts (REITs) from 2000 to 2015.


The authors use panel data spanning from 2000 to 2015 to examine the impact of the GFC on REITs’ earnings management (EM) after controlling for other factors (including the market shock in 2007 and 2008). The measurements of EM are estimated by using the models developed from literature such as modified Jones models. The static panel data regression models are used to estimate the impact of GFC on the REITs’ EM.


The authors find that REITs are more likely to engage in income-increasing EM to embellish their financial reports during the GFC. However, the magnitude of the use of EM to manipulate disclosed financial information decreased following the GFC, indicating an improvement in the quality of financial disclosure as a consequence of the enhancement of the regulatory environment. REITs also changed the manner in which their EM behavior responded to the main factors in the market following the outbreak of GFC.

Research limitations/implications

This study contributes to the finance and accounting literature by providing the first empirical test results concerning how the financial disclosure behavior and quality of listed portfolios and companies such as REITs have changed corresponding to the enhancement of the regulatory environment and adverse market conditions brought by GFC.

Practical implications

This study provides references for investors, auditors, and regulators to help them make adjustments for and improve the interpretation of the disclosed financial information.


This is one of the first empirical study testing the impact of the GFC on EM. It is also the first empirical study investigating the impact of GFC on the financial disclosure behavior of REITs.



Liang, J. and Dong, Z. (2018), "How the 2007 global financial crisis changed the financial disclosure behavior", Property Management, Vol. 36 No. 2, pp. 156-172.

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