XBRL Implementation and Real Earnings Management: Evidence from XBRL Dual Regulation in China

• In Event: Financial Accounting and Reporting 9

Abstract

Abstract: In this paper, we test the impact of XBRL (eXtensible Business Reporting Language) on real earnings management using listed firms from Shanghai and Shenzhen stock exchanges over 1998 to 2013. We find the level of real earnings management increases significantly after the mandatory adoption of XBRL indicating XBRL complexity makes managers more innovative to manipulate earnings using real activities. Furthermore, we investigate the impact of dual regulation from China Securities Regulation Committee (CSRC) and Ministry of Finance (MOF) on XBRL implementation. The results show that the dual regulation from two different agencies with different XBRL standards increase transition costs and implementation difficulties for most of the listed firms, reflected in the continuous increase of real earnings management and decline of superiority for Big 12 after the occurrence of dual regulation in the process of XBRL implementation in China.

Authors

• Songsheng Chen, Beijing Institute of Technology

• Jun Guo, Rutgers University - Camden

• Tong Xiaoxiao, Beijing Institute of Technology