Enquiry Letter Supervision and Corporate Real Earnings Management Strategy

Abstract

Abstract: By making use of the enquiry letters disclosed by stock exchanges from 2015 to 2018, this paper investigates the impact of enquiry letter system on the real earnings management behaviors of the listed companies. The existing literatures point out that the enquiry letters in the financial reports can restrict the accrued earnings management of the listed companies, while this study finds out that the listed companies receiving enquiry letters in financial reports can turn to implement real earnings management. Further study finds out that the behavior of implementing real earnings management by the companies receiving the letters would be more significant in the enterprises with severe agency problems; however, it is restricted in the state-owned firms and the firms with higher reputation auditors or with longer listed years. The above study shows that there is still a certain blind spot of supervision in the enquiry letter system in China’s securities markets. The conclusion of this paper can provide the theoretical basis and policy reference for regulators to improve their regulatory measures.

Key words: enquiry letter, real earnings management, information disclosure

CLC Number:

F275.5

ZHANG Yan. Enquiry Letter Supervision and Corporate Real Earnings Management Strategy[J]. Contemporary Finance & Economics, 2020, 0(3): 90-101.

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