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The purpose of this paper is to document earnings management of Chinese firms.

The paper takes advantage of the introduction of stringent delisting requirements around 2000 that non-cross-listed firms with consecutive earnings losses for more than two years would be delisted from the mainland Chinese exchanges. The paper examines whether listed firms in Chinese market manage earnings to avoid listings. The paper also examines whether mainland Chinese firms cross-listed in Hong Kong exchanges manage earnings the same way. The measure for earnings management is derived from a kernel density estimate for the return on equity distribution, following Bollen and Pool (2009).

The paper finds that the new delisting threats induce rampant earnings management on mainland markets, and cross-listing in Hong Kong has a curbing effect on earnings management. The paper also finds that prices became less value relevant after the implementation of delisting regulations, and investors rationally discounted the reliability of earnings announcements in China. Such market responses were absent for cross-listed firms in Hong Kong.

There is little conclusive evidence about whether cross-listing in a non-US market has a curbing effect on earnings management. The paper contributes to this literature by using this unique exogenous policy change in China and following a difference-in-difference approach in identifying the potential curbing effect. The particular measure adapted from Bollen and Pool (2009) utilizes information of the whole distribution of return on equity, thus extends earlier crude comparison of nearest two bars around zero and partially deals with the potential endogeneity problem.

The purpose of this paper is to analyze the wealth effect of involuntary delisting and investigate insider opportunism and the role of corporate governance, liquidity and legal environment in involuntary delisting in Japan’s stock market.

The authors use a sample of 136 involuntarily delisted firms in Japan’s stock markets between 2002 and 2012. The authors examine ownership changes of inside shareholders prior to delisting and estimate regression models for the wealth effect of involuntary delisting.

Involuntary delisting is highly disruptive in Japan, and limited liquidity of delisted stocks appears to be an important cause. However, the ownership reduction of inside shareholders before delisting is limited, totaling 2–3 percent. For delisted firms with an insider bank, the decrease in share price leading up to a delisting announcement is much less, while the decrease in share price upon a delisting announcement is far greater.

The study investigates involuntary delisting in regard to the opportunistic behavior of inside shareholders and the role of institutional environment in Japan’s stock market. Insiders, especially insider banks, maintain ownership in a distressful context leading to the forcible delisting of a distressed firm. The authors find some evidence that suggests that the market believes the insider bank will try to prevent the ailing firm’s insolvency. The findings are consistent with the implicit relational contracts that characterize Japanese firms.

The purpose of this paper is to examine governance and earnings management implications of the delisting regulation in China, which designates firms with two consecutive losses as Special Treatment (ST) firms and delists such firms, should two more years of consecutive losses occur.

Samples were selected using the matching‐sampling method, and interrupted time‐series Logit regression analyses was used to test the determinants of ST firms using corporate governance factors and earnings quality.

It was found that firms which subsequently become ST firms have greater agency problems, as indicated by divergence of ownership and less independent boards, as measured by the number of independent directors. The ST firms subsequently reduce their agency costs by increasing ownership concentration and increasing the number of independent directors. Additionally, the results suggest that ST firms engage in earnings management after the first year of loss.

The paper suggests that agency problems play an important role in financial performance, and the Chinese delisting regulation does lead to improvements in governance; nevertheless, it might force firms to engage in earnings manipulation.

Distinct from previous empirical research that has examined earnings management, the authors study it in the context of the delisting regulation in China. Additionally, it is a longitudinal study examining how delisting regulations affect the governance of the firm under financial distress.

Innovation is a key driver of a firm’s ability to survive in the financial market. Previous studies typically consider a firm dead once its shares are delisted from the stock exchange. Despite its negative connotation, delisting may be a strategic decision and therefore be a positive outcome for the company. We study how a firm’s innovative activity, in terms of R&D investments and number of patents, shapes its survival profile, taking into account the heterogeneous nature of delistings. Using a sample of high-tech small and medium enterprises (SMEs) going public in Europe during 1998–2003, we find that more innovative firms, both in terms of patents and R&D investments, have a higher probability to be taken over. However, while firms with a rich portfolio of patents are less likely to voluntarily delist, higher R&D investments increase a firm’s likelihood of being delisted due to compliance failure.

This paper aims to study the influence of political-economic reform and especially privatisation on the quality of financial reporting of the Egyptian companies.

The paper analyses data from official documents and 34 interviews with company executives, financial analysts, external auditors and Stock Exchange regulators to inform our understanding of the relationship between changes in the Egyptian environment and the quality of financial reporting.

The findings of the research suggest that the recent Egyptian political-economic reform, resulting in privatisation has significant influence on negative accounting practices and hence on lowering the quality of financial reporting through its effect on: departure from uniform accounting system and public accounting regulations; issuing new stock exchange regulative rules; reviving the role of Stock Exchange; and increasing competition within Stock Exchange regarding raising funds.

This paper contributes to the literature by identifying the effect of socio-cultural factors on motivating executives to 7 exercise negative accounting practices and hence producing low-quality financial reports (FRs) and by highlighting the fact that accounting practices cannot be generalised worldwide due to the absence of universal socio-cultural factors which shape these practices. This paper employs new institutional sociology theory and contributes to that theory by acknowledging the active interplay between institutional context and economic environment.

The purpose of this paper is to explain the multi-stage dynamic process of financial distress. An attempt is made to explore multiple adverse heterogeneous events of financial distress leading a firm closer to bankruptcy progressively.

Sample comprises 321 ongoing, 54 suspended and 91 delisted non-financial firms from Pakistan Stock Exchange. Financial distress is segregated into three stages, i.e. profit reduction, mild liquidity (ML) and severe liquidity (SL). Flow diagrams are used to explain the transition of healthy firms through proposed stages of financial distress.

Results showed that firms liquidated/winding-up by court documented SL problems and closed their operations well before the delisting year. It is found that healthy firms are more likely to face SL when faced ML problem at first stage. Distressed firms can recover to a healthy position at any stage, however after approaching to SL, recovery is less expected.

The proposed process will provide a foundation for future studies to develop more relevant, robust and accurate early warning system of corporate failure that will help stakeholders to respond potential crisis accordingly and timely.

Previously, most of the studies used the ex post definition of bankruptcy that is criticized due to the contextual application, sample bias and non-segregation by the degree of liquidity problems. The originality of the proposed ex ante model is its segregation into a three-stage process that can be generalized regardless of specific bankruptcy law.

Prior literature has revealed three key earnings benchmarks: earnings level; earnings change; and analysts’ expectations. The purpose of this paper is twofold. First, the authors seek to establish which earnings benchmark induces the largest extent of earnings management. Second, the authors explore the implications of earnings management on firm future performance. Both of these purposes are investigated for Chinese listed companies during China’s IFRS/ISA reporting era.

The authors rely upon the unique regulations and incentives for Chinese listed companies in order to develop four testable hypotheses. Next, the authors employ both logistic and ordinary least squares regressions to test the hypotheses.

The results suggest that Chinese listed firms have the highest level of income increasing discretionary accruals around the earnings level benchmark, followed by the earnings change benchmark. The authors do not find any evidence of earnings management to beat analysts’ expectation. In addition, the authors find evidence that Chinese listed firms with relatively high level of earnings management and low earnings exhibit relatively weak future stock performance.

The findings are the first to document an earnings management benchmark hierarchy with respect to the extent of income increasing discretionary accruals, while simultaneously establishing a link between earnings management and firm future stock performance, for Chinese listed companies. The findings are valuable for regulators and investors by suggesting that management intervention in the reporting process during China’s IFRS/ISA reporting era may act to circumvent delisting regulations and cloud earnings signal for firms that beat certain earnings benchmarks.

The purpose of this paper is to examine the evolution of China's securities market regulation from 1980 to 2007 and the dual role of the government in this process.

When the government is simultaneously the owner and regulator of the securities market, the evolution of securities market regulation follows a path of compulsory institutional change. China's Government authorities have played a dual role in this process by acting both as the securities market regulator and the controlling owner of the stock exchanges. The paper uses the evolution of China's securities market regulation from 1980 to 2007 to illustrate this theoretical framework.

Using the case of China, this paper provides unique evidence of how securities regulation evolves in response to government direction and supervision if the government is both the owner and the regulator of the securities market.

The paper offers insight into issues of securities market regulation in China and other emerging markets.

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.

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.

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.

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.

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.

The purpose of this paper is to investigate the literature and statistical data on the Indian takeover code cum open offers market and break up the historical changes in takeover code into various phases for better understanding and decision making by mergers and acquisitions advisory, legal advisory, merchant bankers, investment bankers, business houses and academia.

The present study describes literature summary on takeover code and evaluates the growth phase of open offers through trend analysis with respect to amendments in Indian takeover code.

Since 14 years of takeover code presence in India, it evidences that there is an empirical support on growth phase in the open offers market.

The study is developed on the basis of Indian takeover regulations and Securities and Exchange Board of India takeover code to wake up the public shareholding and regulatory bodies, by better conveyance of historical review at one place.

This study is the first of its kind, dividing the complete history of Indian takeover code into various phases for review and identifying the gaps for future research. Further, the paper investigates and finds various untouched facts and variables in both literature and statistical data on open offers.