This research shows government procurement reduces earnings management in A-share firms, suggesting stronger internal governance and political ties.
Key Points
Government procurement significantly reduces earnings management in A-share firms, shaping financial practices and governance.
The study identifies a notable decrease in upward financial adjustments among firms contracted by the government, indicating improved internal oversight.
Using a difference-in-differences strategy, findings remain consistent even when focusing on losing bidders in procurement processes.
Evidence suggests firms shift from public appeasement to strengthening political connections, influenced by government funding as a financing substitute.