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1 – 4 of 4Udomsak Wongchoti, Ge Tian, Wei Hao, Yi Ding and Hongfeng Zhou
The authors provide a comprehensive empirical examination on the impact of earnings quality on stock price crash risk in China.
Abstract
Purpose
The authors provide a comprehensive empirical examination on the impact of earnings quality on stock price crash risk in China.
Design/methodology/approach
The authors acknowledge and distinguish two-dimensional proxies for earnings quality – accounting-based (earnings management degree) and market-based (earnings transparency) known in accounting and finance literature.
Findings
The authors find that both generally indicate that better earnings quality is associated with less crashes. However, extremely high earnings transparency interacted with insider trading profit can also actually exacerbate stock price crashes.
Originality/value
This study is the first to highlight the pertinence of accounting-based measures to proxy for earnings quality in a fast-growing emerging market environment such as China.
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Keywords
Wenzhou Qu, Udomsak Wongchoti, Fei Wu and Yanming Chen
The purpose of this paper is to test an implication of the pecking order theory to explain capital structure decisions among Chinese listed companies during the 2005-2007 NTS…
Abstract
Purpose
The purpose of this paper is to test an implication of the pecking order theory to explain capital structure decisions among Chinese listed companies during the 2005-2007 NTS Reform transition period.
Design/methodology/approach
The authors utilize direct proxies for information asymmetry based on microstructure models including Probability of the arrival of informed trades (PIN), Adverse selection component of the bid-ask spread (λ), Illiquidity ratio (ILLIQ) and liquidity ratio, and Information asymmetry index (InfoAsy) to examine their relation with firms’ debt financing.
Findings
Consistent with the prediction of Pecking Order Theory, the authors find that companies for which stock investors are challenged with more severe informational disadvantages are associated with higher degree of leverage use.
Originality/value
The study provides a more direct test on the positive relation between information asymmetry and financial leverage of Chinese firms. In contrast to previous findings by Chen (2004), the results suggest that capital structure choices among Chinese firms progressively conform to conventional finance theories (e.g. Pecking Order Theory) with the decline of non-tradable shares.
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