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Article
Publication date: 1 July 2011

Liu Jianghui

The purpose of this paper is to explore the reasons for the high‐frequency switches of lead underwriters by Chinese listed companies in their seasoned equity offerings. It…

Abstract

Purpose

The purpose of this paper is to explore the reasons for the high‐frequency switches of lead underwriters by Chinese listed companies in their seasoned equity offerings. It contributes to the literature by filling the gap and providing evidence that institutional and non‐market factors could affect listed companies' decisions to switch their lead underwriters in the Chinese capital market.

Design/methodology/approach

This paper employs a numerical measure of listed companies' loyalty to evaluate their frequency of switching lead underwriters, and employs a Logit model and an OLS model to identify the key determinants of switching lead underwriters by Chinese listed companies.

Findings

It is observed that the frequency of switching lead underwriters is very high among Chinese listed companies for their seasoned offerings. It is also found that underwriters' deficient reputation and the lack of industrial experience, together with the depreciation of relationship‐specific assets, could have important impacts on lead underwriters being frequently switched in China. Besides, the frequent switches of lead underwriters could also be attributable to the non‐market supervision and regulatory influences by Chinese authorities over the security underwriting market.

Originality/value

This paper could help further the understanding of the factors that could explain the listed companies' frequent switches of their lead underwriters for their seasoned offerings in China. In addition, this paper has policy implications on how to improve the listed companies' loyalty for regulators in China. These implications could help improve the regulatory environment and promote the overall performance of the Chinese security underwriting market.

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Article
Publication date: 15 March 2013

Wen Qu, Philomena Leung and Barry Cooper

The aim of this paper is to investigate stakeholder power changes and their impact on firms' disclosure decisions in the Chinese stock market. Using legitimacy theory and…

Abstract

Purpose

The aim of this paper is to investigate stakeholder power changes and their impact on firms' disclosure decisions in the Chinese stock market. Using legitimacy theory and stakeholder theory, the paper identifies newly emerged stakeholder groups for listed Chinese firms during three distinguished periods of the development of the Chinese stock market.

Design/methodology/approach

Panel data analysis was undertaken over a period from 1995‐2006 with an aim to examine the influence of stakeholder power changes on voluntary disclosures made by 297 listed firms in their 12 years of annual reports. A voluntary disclosure checklist has been used for hand‐collecting data from annual reports.

Findings

The finding shows that different stakeholder groups exert different degrees of influence on firms' decision‐making in respect of information disclosure during different stages of the development of the Chinese stock market.

Research limitations/implications

The impact of a stakeholder power changes on corporate disclosure has not been well addressed and how listed Chinese firms respond to these changes is still a significant gap in the Chinese corporate disclosure literature. In this study, the paper uses proxies to represent each stakeholder group, discuss power changes of each group and predict the impact of power changes on firms' voluntary disclosure.

Originality/value

The paper identifies the new content of the “social contract” between listed firms and Chinese society and identifies various stakeholder groups of listed Chinese firms in the context of a new “social contract”. The paper predicts that voluntary corporate disclosure is the result of stakeholder pressures and firms use voluntary disclosure as one of their strategies to manage the firm‐stakeholder relationship.

Details

Managerial Auditing Journal, vol. 28 no. 3
Type: Research Article
ISSN: 0268-6902

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Book part
Publication date: 7 January 2015

This chapter examines China’s corporate governance and accounting environment that shapes the adoption of internationally acceptable principles and standards…

Abstract

This chapter examines China’s corporate governance and accounting environment that shapes the adoption of internationally acceptable principles and standards. Specifically, it examines international influences, including supranational organizations; foreign investors and international accounting firms; domestic institutional influences, including the political system, economic system, legal system, and cultural system; and accounting infrastructure. China’s convergence is driven by desired efficiency of the corporate sector and legitimacy of participating in the global market. Influenced heavily by international forces in the context of globalization, corporate governance and accounting practices are increasingly becoming in line with internationally acceptable standards and codes. While convergence assists China in obtaining legitimacy, improving efficiency is likely to be adversely affected given that corporate governance and accounting in China operate in an environment that differs considerably from those of Anglo-American countries. An examination of the corporate governance and accounting environment in China suggests heavy government involvement within underdeveloped institutions. While the Chinese government has made impressive progress in developing the corporate governance and accounting environment for the market economy, China’s unique institutional setting is likely to affect how the imported concepts are interpreted and implemented.

Details

Adoption of Anglo-American Models of Corporate Governance and Financial Reporting in China
Type: Book
ISBN: 978-1-78350-898-3

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Article
Publication date: 1 January 2006

Lan Jiang

Following China entered the World Trade Organisation in November 2001, attention has been paid worldwide to the current Chinese legal system, political policies, and the…

Abstract

Following China entered the World Trade Organisation in November 2001, attention has been paid worldwide to the current Chinese legal system, political policies, and the development of economic reform. Recent debates on corporate governance in China have become a global topic of interest. The corporate governance reform is now the centre of the enterprise reform. This paper evaluates the development of corporate governance reform in China and identifies its changes in legislation on corporate control. This paper provides evidence to show that China has been making significant progress in the development of corporate governance reform. It concludes that China has established a fundamental legal framework for corporate governance. The changes in regulations on corporate control indicate that the development of a more sophisticated corporate governance system is under way. However, corporate governance reform in China is still at an early stage of development. The existing problems are still significant. Laws and legal institutions have experienced difficulties keeping up with the changes that have been taking place in China. The rights of selecting management of state‐owned enterprise still remain in the hands of the state. The reform of the banking system lags behind the development of the market economy and state‐owned banks are still under government's control. The paper argues that in Chinese context as far as the rights of selecting management remain in state's hand, the independent board of directors will have less power to achieve the goals in corporate control. Thus the agency problems will not be solved, and it is very difficult to excise and protect minority shareholders' interest. In today's Chinese market the corporate governance cannot provide the protection of minority investors' interests. This paper also argues that it is very dangerous for individual investors to invest in the Chinese market and they have to bear higher risks. This paper suggests that increasing the Sophistication of the corporate governance system of both internal and external control is the key for the Chinese market. This is because the Chinese context is very complicated. There are so many regulations and laws applied in business practice. Different companies and enterprises apply different laws. This paper points out when a national corporate governance system is established it should serve the whole economic market. Thus the further reform of state‐owned enterprises and also the banking system should take place so that China can build up a real economic market structure according to international regulations. This paper also suggests that in the long‐term, building up a cultural background for applying corporate governance system is very important in Chinese society. Improving the culture in the social environment could help to improve the corporate governance in business practices.

Details

Social Responsibility Journal, vol. 2 no. 1
Type: Research Article
ISSN: 1747-1117

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Article
Publication date: 1 March 2006

Wen Qu and Philomena Leung

The purpose of this preliminary study is to explore the impact of changed cultural environment on the voluntary disclosure behaviour of Chinese listed companies.

Abstract

Purpose

The purpose of this preliminary study is to explore the impact of changed cultural environment on the voluntary disclosure behaviour of Chinese listed companies.

Design/methodology/approach

A theoretical framework of the relationship between corporate disclosure and governance forms the basis of the research. A composite checklist of corporate disclosure was developed using relevant corporate governance indices and analyses were carried out on the 2003 financial reports of 120 Chinese listed companies. Six areas of voluntary disclosure of the sample companies were analysed and reported. These areas are: board structure and functioning, employees related issues, director remuneration, audit committee, related party transactions and stakeholder interest.

Findings

The results suggest that as China's cultural and social norms change, there was willingness of Chinese listed companies to provide voluntary information in addition to the disclosure requirements. Information relating to stakeholder interest and employees issues are found more frequently disclosed by listed companies than those which were regarded as sensitive. This is an exploratory study which shows that further research may provide more concrete evidence of the changing corporate disclosure environment in China.

Research limitations/implications

This study based on one year's results and as such has limitation in the interpretation of the results. Further research is necessary to demonstrate the impact of culture in corporate disclosure.

Practical implications

The results have practical implications for professional accountants and auditors to understand further the trend of voluntary disclosure in China. The paper provides some evidence of the changing scene of Chinese corporate governance practice.

Originality/value

This study fulfils a gap in prior research by examining the effect of cultural implications in corporate governance, in an emerging economy. The composite voluntary disclosure checklist will serve a good basis of measurement in corporate disclosure.

Details

Managerial Auditing Journal, vol. 21 no. 3
Type: Research Article
ISSN: 0268-6902

Keywords

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Article
Publication date: 1 July 2001

Z. Jun Lin and Liyan Wang

This paper presents a comparative study of the financial reporting practices of three Chinese companies listed simultaneously in Mainland China (A‐shares) and Hong Kong…

Abstract

This paper presents a comparative study of the financial reporting practices of three Chinese companies listed simultaneously in Mainland China (A‐shares) and Hong Kong (H‐shares). Their financial statements, prepared based on the accounting and disclosure regulations in China and Hong Kong (or International Accounting Standards, IASs) over the period of 1995‐1998 were studied, including an examination of their corporate structures, and vertical and horizontal comparisons of their primary accounting numbers and key financial ratios. This study demonstrates that significant discrepancies exist for financial information disclosed in terms of Chinese GAAP, Hong Kong GAAP or IASs. In addition, there are notable deviations in financial disclosures among the three companies. The study findings confirm the existence of a substantial gap between the Chinese practices of corporate accounting and financial reporting and the internationally accepted norms. It is suggested that there is an urgent need to promote internationalization of Chinese accounting and improve the understandability and comparability of financial statements released by Chinese listed companies in order to enhance their relevance and usefulness for decision‐making by domestic and overseas investors.

Details

Managerial Auditing Journal, vol. 16 no. 5
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 20 September 2011

Fan‐Hua Kung, Kieran James and Chia‐Ling Cheng

The objective of this paper is to examine the incremental effects of overseas listing on earnings conservatism. In particular, it investigates whether mainland Chinese

Abstract

Purpose

The objective of this paper is to examine the incremental effects of overseas listing on earnings conservatism. In particular, it investigates whether mainland Chinese companies listed “overseas” in Hong Kong exhibit a higher degree of earnings conservatism than companies without overseas‐listing.

Design/methodology/approach

The paper employs the concept of “conditional conservatism” and adopts Basu’s (1997) conservatism model, examining data for Chinese companies overseas listed on the Stock Exchange of Hong Kong as H‐shares, to test hypothesis concerned with the difference in the speed with which economic gains and losses are captured in accounting earnings.

Findings

The empirical findings indicate that both overseas‐listed and China‐only‐listed Chinese companies demonstrate a minimal degree of earnings conservatism in the earlier sample sub‐period. However, companies listed overseas provide a higher degree of earnings conservatism overall. Furthermore, this conservatism becomes statistically significant in the 2006 to 2008 sub‐period.

Originality/value

The evidence in this study shows that differences in earnings conservatism arise from differential information demands and differential regulations. Hence the findings have direct policy implications for the regulatory agencies in China and Vietnam and in the ex‐communist countries further afield such as Russia, the former Soviet Union, and Eastern Europe.

Details

Asian Review of Accounting, vol. 19 no. 3
Type: Research Article
ISSN: 1321-7348

Keywords

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Article
Publication date: 9 March 2020

Wanting Lu and Xiaokang Zhao

The purpose of this paper is to start with the background of the construction of the M-score model, find the variables that can represent the fraud characteristics of…

Abstract

Purpose

The purpose of this paper is to start with the background of the construction of the M-score model, find the variables that can represent the fraud characteristics of Chinese companies, and use the data of Chinese A-share listed companies to modify the M-score model.

Design/methodology/approach

In this paper, the fraud behavior of Chinese enterprises that M-score cannot detect is summarized as the basis of adding variables. Then, based on the data of Chinese listed companies, a modified M-score model including nine variables is constructed by the logistic regression method based on Wald.

Findings

Based on the original 8 variables of M-score, this paper adds 10 new variables that can represent the fraud characteristics of Chinese listed companies, and finally, constructs a modified M-score model with 9 variables. Results indicated that indexes such as gross profit margin, fixed assets depreciation rate, equity concentration and audit opinion can characterize the financial fraud of Chinese listed companies.

Practical implications

The modified M-score model based on the characteristics of Chinese enterprises’ fraud is more suitable for Chinese market, which can help investors avoid fraud risks, protect their own rights and interests and reduce losses.

Originality/value

Starting from the background of the model, this paper looks for variables that can characterize the characteristics of fraud in Chinese listed companies. Then, subdivides the research samples into specific fiscal years in which fraud occurs, so that the modified M-score model can be more suitable for the Chinese market.

Details

Journal of Financial Crime, vol. 28 no. 2
Type: Research Article
ISSN: 1359-0790

Keywords

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Article
Publication date: 16 January 2007

Jinghui Liu and Ian Alexander Eddie

This study attempts to examine the issues relating to corporate financial reporting of Chinese listed companies under specified institutional settings as companies with…

Abstract

Purpose

This study attempts to examine the issues relating to corporate financial reporting of Chinese listed companies under specified institutional settings as companies with different share‐categories are required to prepare annual reports under various General Accepted Accounting Principles (GAAP).

Design/methodology/approach

This study selects Chinese companies that issue negotiable shares to examine whether corporate disclosure patterns are different under various institutional settings. Negotiable shares can be traded on stock exchanges and are divided into A‐, B‐ and H‐shares. The extent of corporate disclosure is obtained from the content analysis of annual reports for 191 sampled Chinese listed companies with various share categories. The association are hypothesized and tested between the level of corporate disclosure and the following corporate determinants: company size, profitability, auditor, leverage, industry and ownership structure.

Findings

The extensive regulations and different standards influence on disclosures of companies with foreign investment participation and overseas listing status. By reconciliation of their annual reports according to the IFRSs or the GAAP of the listing country, these companies increased information disclosure voluntarily in order to enhance their reputation and credibility. Some corporate factors, such as company size, profitability and the size of auditor, have influenced the level of corporate disclosure in annual reports of domestic and foreign share‐based companies. Ownership structure has positive impact on the level of disclosure for companies with domestic investors.

Originality/value

This study advances knowledge of the influence that legislative circumstances and ownership structures can have on disclosure decisions made by management in their annual reports. This information is of high interest to domestic and foreign investors and regulators in understanding of financial reporting in Chinese listed companies.

Details

Asian Review of Accounting, vol. 15 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

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Article
Publication date: 24 January 2019

Qingquan Xin, Ruitao Li and Sonia Wong

The purpose of this paper is to provide an introduction to the reverse mergers (RMs) conducted in the Chinese stock market by summarizing the regulatory system, surveying…

Abstract

Purpose

The purpose of this paper is to provide an introduction to the reverse mergers (RMs) conducted in the Chinese stock market by summarizing the regulatory system, surveying the literature on RMs and analyzing the major characteristics of 161 RM cases.

Design/methodology/approach

This paper introduces the characteristics and evolution of the regulatory framework governing RM activity in China. Then the paper reviews relevant academic studies on the RMs in China and other countries. Finally, the paper identifies and discusses the major characteristics of 161 RM cases in the Chinese stock market from 2006 to 2016.

Findings

Private companies that go public via RMs in China not only have superior asset quality but also demonstrate good accounting and stock price performance after listing, and these results are unlike those of studies on the quality of RMs in other countries.

Research limitations/implications

This paper is based on a survey of 161 RM cases in China’s stock market, with the major characteristics of the RMs being identified and analyzed. The limitations of previous studies and suggestions for further research are discussed.

Originality/value

This paper suggests that the relative superior performance of RMs in the Chinese stock market is caused by the interplay of market forces and regulatory oversight. The Chinese regulator’s pragmatic and flexible approach plays an important role in formulating regulatory policies that respond to the changing macroeconomic environment and financial markets.

Details

China Finance Review International, vol. 9 no. 1
Type: Research Article
ISSN: 2044-1398

Keywords

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