Private vs State Ownership and Earnings Management: Evidence from Chinese Listed Companies

Yuan Ding (First Author), Hua Zhang (Participant Author), Junxi Zhang (Participant Author)

Research output: Contribution to journalJournal


In this study, we investigate the role played by a firm’s ownership structure in earnings management, with reference to the Chinese capital market. We measure the impacts of both ownership concentration and different ownership types, specifically the difference between the state as blockholder and private blockholders. Analysing 273 privately-owned and state-owned Chinese companies listed in 2002, we establish a link between ownership structure and firms’ earnings management practices. Our results show that the relationship between earnings management measures and ownership concentration exhibits a statistically significant non-linear, inverted U-shape pattern known as the “entrenchment versus alignment” effect. It is clear that privately-owned listed companies tend to maximise their accounting earnings more. However, the entrenchment effect of ownership concentration on earnings management is weaker in privately-owned listed firms than in state-owned listed firms. Our study also confirms that when a firm manages its earnings, it tends to do so through both operating-related accrual mechanisms and non-operating transactions with related parties.
Original languageEnglish
Pages (from-to)223-238
JournalCorporate Governance: An International Review
Issue number2
Publication statusPublished - 2007


  • China
  • Earnings management
  • corporate governance
  • ownership

Indexed by

  • ABDC-A
  • Scopus


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