Comparative Study on the Impact of Internal Control of Listed Companies on Earnings Management between Shenzhen and Shanghai Stock Exchange in China

Author(s)

Dr. Shunhua Yang , Felix Kwame Nyarko , Haibin Yang , Zheng Liyun , Regina Naa Amua Dodoo ,

Download Full PDF Pages: 108-118 | Views: 819 | Downloads: 216 | DOI: 10.5281/zenodo.4971382

Volume 9 - July 2020 (07)

Abstract

Taking 884 Manufacturing Listed Companies in Shenzhen and Shanghai Stock Exchange in 2017 as samples, this paper empirically examines the relationship between internal control and earnings management of the two stock exchanges. The final conclusion confirms that, there is a significant negative correlation between internal control and earnings management of manufacturing listed companies in Shenzhen and Shanghai Stock Exchanges. Compared with the relationship between internal control (IC) and earnings management (EM) of manufacturing listed companies in Shanghai Stock Exchange and that of Shenzhen Stock Exchange, the negative correlation between internal control and earnings management is more prominent in Shenzhen Stock Exchange which includes 70% manufacturing listed companies. Shenzhen Stock Exchange includes not only main board market, but also small and medium-sized enterprise board (SMEB) and Growth Enterprise Market (GEM). It indicates that, IC regulation enforced in main board listed company has made a good effect in manufacturing industry. The improvement of internal control quality can better regulate earnings management behavior of listed manufacturing companies. Here suggests that, IC regulation can be enforced in SMEB and GEM in right chance, which is helpful to the healthy and orderly development of manufacturing industry in China.

Keywords

Earnings Management; Internal Control; Comparative Study; Manufacturing Listed Companies

References

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