Chinese firms resort to risky earnings tactics to meet performance targets.
The study looked at how companies in China manage their earnings to meet regulations. They found that firms are more likely to manipulate their earnings when they are at risk of not meeting performance targets set by regulations. The study also suggests that there may be different costs associated with different types of earnings management strategies. Overall, the research shows that firms in China engage in both accounting and real earnings management activities, especially when facing regulatory pressure.