Speaker：Gao Kaijuan，Assistant professor, School of Business Administration, Hunan University

Time: 10:00am, Tuesday, September 3,2019

Site：EMS A204

Abstract: Capitalizing on a quasi-natural experiment in China where some firms become investible to the global market across different times (i.e., pilot firms), we explore the role that stock market liberalization plays in shaping firms’ financial reporting practices. In one direction, market liberalization may benefit firms by generating more demand for high quality earnings, inducing a revaluation premium, easing firms’ financial constraints, and strengthening their corporate governance, all of which improve firms’ accounting transparency. In the other direction, the potential volatility stemming from international speculative hot money casts doubt on whether the potential benefits of removing a country’s capital controls outweigh the associated costs. To gauge which force is more dominant, we rely on a staggered difference-in-differences research design and find that pilot firms significantly reduce the magnitude of discretionary total and working capital accruals from the pre-liberalization period to the post-liberalization period, compared to non-pilot firms during the same timeframe. Further, we identify two specific mechanisms through which market liberalization curbs firms’ earnings management: (i) auditors more strictly monitor pilot firms; and (ii) pilot firms experience significant increases (decreases) in ownership of dedicated (transient) institutional investors. Our research provides insight on the importance of financial global integration to firms’ discretionary reporting practices.

Introduction to the Speaker：

Gao Kaijuan, Ph.D. in accounting, is an assistant professor in school of business administration, Hunan University. At present, many academic achievements have been published in such journals as International Review of Economics & Finance, Finance Research Letters, China Journal of Accounting Research, Management World, Financial Research, Nankai Management Review and Accounting Research. She worked as an anonymous reviewer of International Review of Economics & Finance, Nankai Management Review and Management Review, and presided over and participated in a number of national and provincial level projects.