کنترل اقتصاد کلان، هزینه های سیاسی و مدیریت سود: شواهدی از شرکت های چینی دارایی واقعی

Firms in China have faced high political costs during China’s economic transition, because they are affected by macroeconomic policies. However, research to date has offered no consistent conclusions on the relationship between political costs and earnings management in China. This study tests whether real estate firms attempt to decrease earnings during periods of macroeconomic control, using variables related to the national real estate market as proxies for political costs. We find that political costs are negatively related to earnings management in listed real estate firms. In addition, we find that non-state-owned enterprises utilized more income-decreasing accruals during this period. Our results are consistent with the political costs hypothesis.

The political costs hypothesis of earnings management, which is one of three basic hypotheses of positive accounting theory, has long been an important issue in positive accounting research (Watts and Zimmerman, 1986). However, prior research has mainly focused on mature Western market economies (e.g., Zmijewski and Hagerman, 1981, Daley and Vigeland, 1983, McKee et al., 1984, El-Gazzar et al., 1986, Boynton et al., 1992, Han and Wang, 1998 and Monem, 2003). The existing research on transition and emerging economies is limited. For instance, there has been relatively little research on China and prior studies have not been able to draw uniform conclusions (e.g., Wang, 2000, Wu et al.., 2004, Liu and Jing, 2005, Liu et al., 2005 and Zhang, 2008). In addition, there are huge political and economic differences in the institutional backgrounds of mature and emerging markets. These differences are clearly observable between China and most Western countries. Accordingly, the motivation for this study is to explore whether the political costs hypothesis of earnings management differs between emerging and mature markets. This study aims to address the following questions. Is the political costs hypothesis applicable to China? Do listed companies in China face different political costs compared to listed companies in Western countries? Which variables best characterize the political costs of listed companies in China? Do China’s listed companies consider political costs when they manipulate earnings? This study examines a sample of real estate firms in China. The real estate industry is highly capital intensive and its health is vital to national well-being and people’s livelihoods in general. The development and stability of the real estate market can greatly affect macroeconomic operations and social stability (Huang et al., 2009). Accordingly, the Chinese government has shown interest in regulating the development of the domestic real estate market. Nation-wide real estate development boomed in 2001 placing huge upward pressure on prices and led to strong growth of the real estate industry in China. This growth generated huge profits for real estate businesses. However, excessive development distorted the allocation of resources to such a degree that it threatened the health of China’s macroeconomic operations. Since 2003, the Chinese government has promulgated a series of policy documents on the macroeconomic regulation of the real estate industry. Overall, the government’s aim is to use various policy tools to control real estate prices to achieve a more reasonable price level. To avoid being subject to more stringent regulations and public scrutiny, real estate companies are likely to adopt earnings decreasing accounting policies. Thus, the rapid development of China’s real estate market and the subsequent regulatory changes provide an excellent research and experimental setting in which to examine the relationship between political costs and corporate earnings management behavior in an emerging market. Using data from listed real estate companies in China from 2002 to 2007, we conduct an empirical study to determine whether the political costs hypothesis is applicable to China. The results show that, with the implementation of increasingly tight macroeconomic controls, listed real estate companies adopted earnings decreasing accounting policies. In addition, because state-owned real estate companies have a different sensitivity to political costs, non-state-owned listed companies have more incentive to adopt earnings decreasing accounting policies. Our study makes several contributions to the literature on earnings management. First, we associate macro-level government regulation with the micro-level corporate use of earnings management in the economic development of a transition economy. We find that macroeconomic controls can provide an incentive for earnings management, which is different from the effects of political costs found in Western countries. Second, due to the asymmetric effects of the same macroeconomic policies, different political cost sensitivities are found to exist between different types of companies. These findings enrich the political costs hypothesis and our understanding of the impact of macroeconomic policies in the institutional setting of China. The remainder of this paper is organized as follows. Section 2 presents the literature review, theoretical analysis and hypothesis development. Section 3 describes the sample, variables and the empirical results. The final section concludes the paper, outlines the limitations of our study and proposes future research directions.

Using a sample of listed real estate companies between 2002 and 2007, we conduct an empirical study of the political costs hypothesis for earnings management in the context of China. The results show that, to avoid the negative impact of tightening government policies, listed real estate companies have an incentive to decrease current earnings. The motivation to conduct earnings management is greater for non-state-owned real estate companies than state-owned companies. However, we do not find evidence that ordinary state-owned enterprises are more sensitive to political costs compared to central government enterprises. The results of our study demonstrate that close attention needs to be paid to economic indicators that act as references for macroeconomic controls when conducting earnings management research in the context of China. Our first contribution to the earnings management literature is that company size, commonly used as a proxy for political costs in traditional Western research, does not apply in the context of China. Economic indicators that act as references to macroeconomic controls may be more accurate. Second, we test for differences in political cost sensitivity in different types of corporations, thereby enriching the approach to political costs research in China. Our findings provide a reference for government industrial policy during transition periods. There are a number of limitations to this study. First, we created new variables as proxies for political costs that have never been used in previous studies. We do not study the importance of real estate prices for government regulation or how political costs are applied to the real estate industry. Further research is needed in this field, for example, to examine whether the ease of re-financing and the level of tax incentives play important roles in earnings manipulation. Second, our political cost indicator is limited to the macroeconomic level and we fail to identify the political costs of individual companies. In addition, as there are a variety of real estate price indexes, it may be questionable whether our indicator is the most appropriate. These choices may all have an impact on the final results. Third, our sample is limited to the real estate industry, which weakens the generalizability of our conclusions. Nonetheless, these limitations all provide directions for future research