Department of Accounting

Department of Accounting
Business Building (BS), South Campus
Xi'an Jiaotong-Liverpool University
8 Chongwen Road Suzhou Dushu Lake Science and Education Innovation District , Suzhou Industrial Park
Suzhou,Jiangsu Province,P. R. China,215123

1. Voluntary Disclosure of Internal Control Weakness and Earnings Quality: Evidence From China

Author:Ji, XD;Lu, W;Qu, W


Abstract:Using a sample of 1059 listed firms that voluntarily provide internal control reports in the period 2010-2011, this paper investigates the relationship between voluntary disclosure of internal control weaknesses (ICWs) and earnings quality in China. Our results show that earnings quality, measured by absolute discretionary accruals, is significantly associated with voluntary disclosure of ICWs. Furthermore, our results demonstrate that both accounting-related and non-accounting-related ICWs affect earnings quality. This study contributes to the internal control literature by extending the evidence for ICW disclosure to an emerging economy and examining the impact of disclosure of different types of ICWs on earnings quality. This study demonstrates that the control of non-accounting-related ICWs is critical for enterprise risk management. (C) 2017 University of Illinois. All rights reserved.
2. Voluntary disclosures practices of family firms in Australia

Author:Louie, J;Ahmed, K;Ji, XD


Abstract:Purpose This paper aims to examine the voluntary disclosure practices of family and non-family listed firms and whether family firms have improved their disclosure practices following the introduction of the Principles of Good Corporate Governance and Best Practice Recommendations in 2003 in Australia. Design/methodology/approach Voluntary disclosures are measured by constructing an index specifically for this study. Such indexes consist of corporate governance disclosure, strategic disclosure and future disclosures. They are then regressed on firm-specific variables while controlling for family and non-family firms. A total of 60 family firms and 60 non-family firms in Australia are randomly chosen from 2001 to 2006 for examining their disclosure practices. Findings The research findings show that family firms disclose information voluntarily to signal to the market regarding their growth potentials and abide by government regulations to improve their reputation. Despite the fact that compliance with the Principles of Good Corporate Governance and Best Practice Recommendations was not compulsory, this paper finds that the recommendation encouraged family and non-family firms to disclose more corporate governance information. Originality/value There has been limited empirical evidence on the disclosure practices and their determinants of family firms in Australia. The study will thus significantly contribute to the current knowledge in this regard.
3. Related party transactions as a source of earnings management

Author:Chen,Jean Jinghan;Chengb,Peng;Xiao,Xinrong

Source:Applied Financial Economics,2011,Vol.21

Abstract:In this article, we contribute to the earnings management literature by addressing the issue of Related Party Transactions (RPTs) during a firm's Initial Public Offering (IPO) process. We regard RPT-based earnings management as a kind of agency problem in the context of Chinese IPOs, and argue that the conflicts of interests between the controlling shareholders and the minority shareholders are the root of RPT-based earnings management in Chinese IPOs. We provide empirical evidence to demonstrate that RPT-based earnings management in a portfolio of earnings management tools including accruals management, and how it affects the firm's post-IPO long-term performance in China. Using 257 Chinese A and B shares IPOs during 1999 and 2000, our empirical findings suggest that controlling shareholders structure operating RPTs in pre-IPO period and these RPTs are positively associated with firm's operating performance.The decline in operating RPTs after IPO contributes to firm's post-IPO long-term underperformance and negatively affects firms' stock return. © 2011 Taylor & Francis.
4. How COVID-19 Has Stimulated Innovation in the Chinese Education Sector

Author:Poshan Yu, Samuel Kwok and Zhongyue Jiang


Abstract:This chapter aims to investigate the impacts of COVID-19 in China's education sector. It will capture the dynamics of the interlinked changing relationships between the availability and use of education technology (EdTech) and the demand for online learning among various stakeholders in the Chinese education market. In addition, this chapter examines whether and how these relationships enhance operational efficiency via transforming the current business models in the sector, in particular due to the COVID-19 pandemic. By analyzing the current practices of the sector, this chapter will critically discuss the challenges and opportunities for technology in education and how these changes in turn drive stakeholders (including students, educators, and regulators) to respond and engage with each other, and how these stakeholder engagements impact the sustainable development of delivery modes, such as digital education and remote learning by using EdTech strategies in the sector.
5. Speculative trading, price pressure and overvaluation

Author:Ding, R;Cheng, P


Abstract:Prior theoretical studies (e.g., Harrison and Kreps, 1978) show that investors pay prices over their valuation of assets if potential buyers are willing to pay even more in the future. This study provides supporting evidence by focusing on the Hong Kong "through train" scheme in August 2007, through which mainland Chinese investors were allowed to directly invest in Hong Kong market, but the decision was reassessed (actually suspended) in November 2007. Our findings show that Hong Kong stocks exhibit excess trading volume associated with the two announcements, and stocks are traded higher after the launch-decision day and lower after the reassessment-decision day. (C) 2011 Elsevier B.V. All rights reserved.
6. Does institutional ownership affect the value relevance of accounting information?

Author:Omran, M;Tahat, YA


Abstract:Purpose Drawing upon agency theory, this study aims to assess the value relevance (VR) of accounting information released by non-financial firms listed on the Kuwait stock exchange for the period of 2015-2018. Also, the influence of institutional ownership level and other explanatory variables, namely, book value per share, earnings per share, growth in assets and changes in financial leverage on share prices is examined. Design/methodology/approach To test the hypotheses, the Ohlson (1995) model is extended. This study uses panel data analysis and applies appropriate statistical techniques to measure empirical relationships. Findings The results show that the VR of accounting information released by the Kuwaiti non-financial listed firms varies over the period of 2015-2018. Book value and earnings have significant and positive effects on share prices. In recent years, the VR of book value information has been growing, while that of earnings information has been declining. Institutional ownership level has a significant and positive influence on the VR of accounting information released by the Kuwaiti non-financial listed firms. The findings confirm a positive power, signalling growth in assets regarding the share prices. However, no significant relationship between changes in financial leverage and share prices is found. Originality/value This study extends the previous literature by investigating a relatively new set of data in more depth than that has been examined by prior research, which focusses on the relationship between accounting information and the firm's market value.

Author:Kwok, S;Maguire, K;Shotte, G


Abstract:This paper draws attention to the question of brand authenticity of luxury products when consumers shopping online. Illustrations from most of the luxury brands show that marketers control the ways and timing of the marketing information dissemination process. Attributes of a luxury product, for example, material, craftsmanship, innovation, and design, are experienced by consumers under the strict control of marketers through the offline sales and marketing channels (Uche Okonkwo, 2007). However consumers are questing for authentic product through the use of Internet and mobile technology nowadays. The self authentication process which is a goal-contingent process is important to marketers to understand the consumers' questing behavior, but how the goals are generated is still unknown to us despite a lot of social-research are carried out. This paper presents an exploratory study, on a pilot case study basis, from psychological perspective, the role and function of the self-image conformation concept of consumers in their questing process of the authenticity of luxury brands that with the goals and associate benefit pursuance in their mind.
8. Internal control weakness and accounting conservatism in China

Author:Ji, XD;Lu, W;Qu, W


Abstract:Purpose - The purpose of this study is to investigate the impact of internal control weaknesses on accounting conservatism in Chinese listed firms. It also investigates the relationship between the demand for external audit and accounting conservatism, and whether additional assurance of internal control reports (ICRs) can mitigate the negative impact of ICWs on accounting conservatism. Design/methodology/approach - An empirical research approach is taken through the use of ordinary least squares (OLS) models and hand-collected internal control weakness data from ICRs released by Chinese listed firms. Findings - The results of this paper show that the existence of ICWs has a negative effect on accounting conservatism in China. Further, the results demonstrate that both accounting-related and non-accounting-related ICWs affect accounting conservatism. The authors also find that there is a complementary relationship between accounting conservatism and the demand for additional assurance of ICRs, and additional assurance of ICRs can mitigate the negative impact of ICWs on accounting conservatism. Practical Implications - This study provides timely evidence to Chinese regulators of the possible economic consequences of the official implementation of internal control standard in China from 2012. The findings of this paper can also benefit regulators around the world and, in particular, the regulators in emerging markets that are considering implement regulations similar to the US SOX. Originality/value - The paper demonstrates that a wider scope of ICWs, including non-accounting-related ICWs, also has a significant impact on accounting conservatism. Therefore, this research provides a more general evidence on the relationship between internal control quality and accounting conservatism.
9. Islamic Banking Products: Home Country Bias and Majority Out-Group Consumption

Author:Omran, M;Ramdhony, D;Gleason, K;Khallaf, A


Abstract:This study provides an overview of the incentives for Muslims and non-Muslims to adopt Islamic Banking (IB) products in non-Muslim developing country. Data is collected from a sample of 1,128 Mauritians. Religion is found to have a significant influence on the intention to adopt IB products. Our results support the prediction of the theory of reasoned action as an individual is more likely to adopt IB product if he/she understands the relevant concepts and terminologies. The adoption of IB products for Muslim customers is significantly associated with bank selection criteria. Further, we provide evidence of a home country bias related to a set of financial products, as well as tactics successful in overcoming the costs of the liability of foreignness in incentivizing cultural "out-groups" to adopt IB products. Our study contributes to the literature on the motivation of individuals to adopt IB products, which is highly relevant for Islamic banks worldwide that seek to offer similar products and attract new customers. We provide implications for bank marketing managers facing the challenge of increasing adoption of new financial services and products in markets where customers may not be aware of the associated benefits due to cultural, religious, or ethnic barriers.
10. The role of voluntary internal control reporting in earnings quality: Evidence from China

Author:Ji, XD;Kaplan, SE;Lu, W;Qu, W


Abstract:Using discretionary accruals to proxy for earnings quality, this study investigates whether and how the first voluntary internal control reporting in 2007 is associated with earnings quality in China. We find that earnings quality is higher in 2007, yet not in 2006, for public companies issuing a first-time voluntary unqualified internal control report, compared with listed firms not issuing an internal control report. Our findings are consistent with a signalling of performance explanation and inconsistent with a signalling of effectiveness explanation. We also find that earnings quality is lower for public companies issuing an internal control report mentioning a weakness, compared with public companies not issuing an internal control report. Overall, our study suggests that public companies conduct diligent self-assessments when issuing a first-time voluntary unqualified internal control report. Consequently, there is an improvement in earnings quality. (C) 2020 Elsevier Ltd. All rights reserved.
11. Tick Size and Market Quality: Simulations Based on Agent-Based Artificial Stock Markets

Author:Yang, XH;Zhang, J;Ye, Q


Abstract:This paper investigates the way that minimum tick size affects market quality based on an agent-based artificial stock market. Our results indicate that stepwise and combination systems can promote market quality in certain aspects, compared with a uniform system. A minimal combination system performed the best to improve market quality. This is the first study to analyse tick size systems that remain at the theory stage and compare four types of system under the same experimental environment. The results suggests that a minimal combination system could be considered a new direction for market policy reform to improve market quality.
12. Determinants and economic consequences of voluntary disclosure of internal control weaknesses in China

Author:Ji,Xu dong;Lu,Wei;Qu,Wen

Source:Journal of Contemporary Accounting and Economics,2015,Vol.11

Abstract:This paper investigates the determinants and economic consequences of disclosure of internal control weaknesses (ICWs) by Chinese listed firms under the voluntary disclosure regime over 2010-2011. We find that the probability of firms disclosing ICWs is not only associated with firm characteristics such as profitability, age and business complexity, but is also strongly related to the unique attributes of corporate governance and ownership structure in Chinese listed firms, e.g. the independence of the supervisory board, political connections, concentration of the top 3 shareholders' ownership and tradability of shares.Our results show that the severity of the ICWs disclosed is negatively and significantly associated with earnings response coefficients (ERCs), and audit assurance of ICRs has a significant moderating effect on the relationship between ICWs and ERCs. Our research adds further evidence to support the implementation of SOX-type regulations globally.
13. Corporate governance and forward-looking disclosure: Evidence from China


Source:Journal of International Accounting, Auditing and Taxation,2015,Vol.25

Abstract:This paper investigates the association between a range of corporate governance mechanisms and forward-looking disclosure (FLD) in a low information environment: the Chinese stock markets. It finds that the implementation of certain monitoring and control mechanisms, such as financial expertise on audit committees and independent directors on the board of directors, can improve the extent of FLD. However, the size of the supervisory board and separating the roles of the CEO and the chairman of the board of directors is of little help in explaining any improvement in FLD. In contrast, ownership structure appears to play an essential role in determining FLD policies. Indeed, listed firms with high levels of foreign ownership and fewer pyramidal layers in their ownership structure tend to disclose more forward-looking information. Of particular interest, the association between state ownership and FLD is likely to be non-linear (an inverted U-shape), and the inflection point at which the association becomes negative occurs at a state ownership over 33 percent. In summary, this study provides new evidence on the impact of corporate governance mechanisms on FLD in China's unique institutional environment.
14. The impact of equity incentive plans (EIPs) on accounting conservatism in listed Chinese firms

Author:Liu, S;Zhang, J


Abstract:Purpose This study investigates whether listed firms using equity incentive plans (EIPs) adopt more conservative accounting in China's unique corporate setting. Design/methodology/approach Based on a sample of 2,243 listed firms and 9,950 firm-year observations for the period of 2008-2017, this study employs piecewise cross-sectional regression models with year and industry fixed effects to examine the associations proposed in the research hypotheses. Findings This study finds a positive relationship between the adoption of EIPs and accounting conservatism in listed Chinese firms. Further analyses reveal that this positive relationship is more pronounced when listed Chinese firms use restricted stock units (RSUs), instead of stock options, in their EIPs. Research limitations/implications Unlike many early studies, this paper empirically investigates the impacts of two different types of equity incentives - stock options and RSUs - and thus contributes to accounting and corporate governance literature by providing a better understanding of the impacts of different types of equity incentives on financial reporting quality. However, this study does not consider other alternative equity incentive measurements because of the limited data regarding Chinese firm's executive compensation. Practical implications This study offers investors and policymakers in China some insight into how accounting conservatism in listed firms might be shaped by equity incentives used in their managerial compensation schemes. Originality/value This study is one of the few that examines the effects of using equity incentives in a large emerging market. It offers support for the view that the recent introduction of policies on EIPs by the Chinese government has an overall positive impact on listed firm's financial reporting quality, as reflected by greater degrees of accounting conservatism.

Author:Kim, SH;An, Y;Udawatte, P


Abstract:This study examines the effects of foreign ownership on Chinese firms ' earnings management practices. Given that foreign shareholders are expected to increase the transparency of the firm's management, this study anticipates that foreign ownership would restrict earnings management of both the accrual-based earnings management (AEM), and real activity-based earnings management (REM). Using the panel dataset of the B-share and H-share firms from 2003 to 2015, this study finds that the H-share firms which cross-listed on both the mainland China and Hong Kong Stock Exchanges are more likely to manage earnings through the discretionary accruals as well as the changes in the firms' operations. In contrast the B-share firms are less likely to manage earnings by using the discretionary accruals. This study also finds that state control and large shareholdings of foreigners can restrict the B-share firms' earnings management through the discretionary accruals. The findings noted in this study imply that foreign investors who want to invest in Chinese firms must be more cautious about market inefficiency and the information asymmetry problem in the Chinese stock markets.
16. The effect of online review exercises on student course engagement and learning performance: A case study of an introductory financial accounting course at an international joint venture university


Source:Journal of Accounting Education,2021,Vol.54

Abstract:© 2020 Elsevier Ltd Prior literature suggests that Chinese students studying in Western Higher Education Institutions (HEIs) tend to underperform compared to local students. Yet few studies have explored the effect of learning and assessment tasks on the engagement and performance of Chinese students who are undergoing a transition into the Western learning environment. We design two online review exercises, which are summative assessments with a formative aspect, for an introductory financial accounting subject and study the effect of these tasks on a group of business students enrolled in the course at an international joint venture university based in China. We find that the online review exercises increase student engagement. Students spent a significant amount of time preparing for the online review exercises both before making their initial attempt and between each attempt. Students undertook a variety of learning activities in completing the online review exercises and their understanding of the subject improved as a result of going through the process. Student performance in the midterm and final exams is positively related to their efforts in completing the online review exercises. The findings are of relevance to accounting educators in both the Western HEIs and traditional Chinese universities who are interested in enhancing the learning performance of Chinese business students.
17. Integrated reporting and board characteristics: evidence from top Australian listed companies

Author:Omran, M;Ramdhony, D;Mooneeapen, O;Nursimloo, V


Abstract:Purpose Drawing upon agency theory, this study analyses the influence of board characteristics on integrated reporting (IR) for the top 50 companies listed on the Australian Securities Exchange (ASX50). Focus is placed on IR at the aggregate level as well as its separate components, namely Future Opportunities and Risks (FOPRI), Governance and Strategy (GOVSTR), Performance (PERF), Overview and Business Model (OBM) and General Preparation and Presentation (GPP). Design/methodology/approach A checklist is devised based on the IIRC (International Integrated Reporting Council) framework to track companies' disclosures for the period from 1st July 2014 to 30th June 2017. Regression analysis is used to investigate the determinants (board size, board independence, activity of the board, gender diversity, firm size, profitability and growth opportunities) of IR and its separate components. Findings The findings indicate a significant and positive effect of board independence on the aggregate IR index, FOPRI and GPP. A negative and significant association is found between activity of the board and both the aggregate IR index and its separate components, including GOVSTR, PERF and GPP. Additionally, the aggregate IR index is significantly related to firm size, profitability and growth opportunities. Research limitations/implications The limited sample of 50 companies over three years is the main limitation of the study. The study suffers from an inherent limitation from the use of content analysis in assessing the level of IR. No checklist to measure the level of IR can be fully exhaustive. Furthermore, we focus on whether an item in the checklist is disclosed, using a dichotomous scale, thus ignoring the quality of information disclosed. Practical implications The study has several practical implications. From a managerial perspective, it shows that having more board meetings harms the level of IR. The results can guide regulators, such as the Australian Securities and Investment Commission (ASIC) and the Australian Securities Exchange (ASX), when drafting new regulations/guidelines/listing rules. If regulators aim for a higher level of integration in the reports, they know which "triggers to pull" to attain their target. Our results can guide regulators to choose the appropriate trigger among various alternatives. For instance, if a higher level of integrated reporting is desired, size instead of profitability should be chosen. Finally, ASX listed companies can use our checklist as a scorecard for their self-assessment. Originality/value This research is the first to investigate IR by devising a checklist based on IIRC (2013) along with an additional GPP component in the ASX context. Using separate models to examine each component of the aggregate IR index is also unique to this study. The study also brings to the fore the role of gender-diverse boards in promoting IR. It reiterates the debate about imposing a quota for better gender representation on boards.
18. The effect of ownership-control disparity on the Chinese firm's real activity earnings management

Author:Kim, SH;An, Y


Abstract:Purpose This paper aims to investigate the impact of the separation between control and cash flow rights (control-ownership disparity) on the earnings management practices of Chinese firms. The notable features of Chinese firms are those of concentrated ownership and the severe disparity that exists between the control and cash flow rights of controlling shareholders. Design/methodology/approach This study measures the level of Chinese firms' earnings management by adopting two different methods of measurement: accrual-based earnings management (AEM) and real activity earnings management (REM). The authors also consider the possible trade-off effects between these two types of measurements. The data set in this study encompasses over 2,000 Chinese firms, using data from 2003 to 2015. Findings The results indicate that controlling shareholders are more likely to engage in AEM as their cash flow rights are more concentrated, while they are less likely to use REM as the disparity of control-cash flow rights increases. Further, this inverse relationship between REM and control-cash flow rights disparity becomes more pronounced in the case of a low cash flow rights group. As REM generally causes distortions in firms' operations, it is possible that the controlling shareholders are more likely to constrain the use of REM as the disparity is perceived to grow. This result may indicate a reduced agency problem between controlling and minority shareholders due to the developing and/or existing ownership dispersions, which are mainly driven by recent reforms applied to Chinese capital markets. However, we do not entirely exclude the possibility of other types of expropriations by the controlling shareholders. It appears that the controlling shareholders are still able to exert a significant level of control, even following a substantial ownership dispersion, and they may seek alternative expropriation methods, including but not limited to intercorporate loan or related party transactions as the disparity of control-cash flow rights increases. Originality/value Although the Chinese economy is experiencing a series of reforms to infuse market forces into capital markets, little has been known about the effects of ownership-control disparity in Chinese firms. Our findings highlight the importance of the country specific context in this vein of research.
19. Ownership structure and analysts' forecast properties: a study of Chinese listed firms

Author:Liu, S


Abstract:Purpose - The purpose of this paper is to investigate the association between ownership structure and the properties of analysts' forecasts in China's unique corporate setting. Design/methodology/approach - Multiple regression models were used to examine the influence of ownership structure mechanisms on analysts' forecast properties for listed Chinese firms during the period 2008-2012. Findings - The paper finds that analysts' forecast accuracy is higher for listed firms with high levels of foreign ownership and managerial ownership. However, the complex pyramidal ownership structure could make corporate information less transparent and then increase the complexity of forecasting; hence, it results in less precise analysts' forecasts. Interestingly, the relationship between state ownership and analysts' forecast properties appears to be non-linear (an inverted U-shape), and the inflection point at which the relationship becomes negative occurs at state ownership over 45 per cent. Originality/value - To the best of the author's knowledge, this paper is the first to investigate the influence of ownership structure mechanisms on the properties of analysts' forecasts in an emerging market, and the findings provide some insight on how the properties of analysts' forecast might be shaped by certain ownership and control features in the context of concentrated state ownership and complex pyramidal ownership structure.
20. o initial reserves signal long-term IPO stock performance?

Author:Cheng, P


Abstract:This research examines the long-run Initial Public Offerings (IPO) stock performance of a large Chinese sample, and in particular the relationship between initial reserves (capital reserves and revenue reserves immediately after the IPO) and long-run IPO stock performance. In general, Chinese IPOs do not underperform the market/industry benchmarks, but they significantly underperform their sizematched industry peers. More importantly, Chinese IPO firms tend to issue a large amount of bonus shares (also called as a 'capitalization issue', i.e. capitalization of the reserves) after the IPO. Consistent with bonus share signaling hypothesis, Chinese IPO firms exhibit increased operating/stock performance subsequent to bonus issues. Interestingly, the size of the initial reserves is positively associated with long-run IPO stock performance. This research adds another piece of empirical evidence to the literature whether IPOs underperform in the long run, by confirming that the choice of performance measures and benchmarks could affect the conclusion on the IPO long-run performance. Further, it discovers that size of initial reserves could signal superior IPO stock performance in the long run.
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