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Can an effective audit committee help to mitigate earnings management in Chinese firms listed in Hong Kong?

Lin, P., Hutchinson, M., & Percy, M. (2009) Can an effective audit committee help to mitigate earnings management in Chinese firms listed in Hong Kong? In Asian Finance Association 2009 International Conference, 30 June - 3 July 2009, Hilton Brisbane, Brisbane, Queensland. (Unpublished)

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    Abstract

    This paper attempts to determine whether the adoption of recommended corporate governance practices by Chinese firms is associated with less earnings management proxied by abnormal accruals. We examine the role of the audit committee and ownership concentration in preventing earnings management using Chinese firms listed in Hong Kong. The results of this preliminary analysis show that the frequency of audit committee meetings is associated with reduced levels of abnormal accruals, our measure of earnings management. We conclude that audit committee activity is an important factor in constraining the propensity of managers to engage in earnings management. In contrast, we find that the size of the audit committee is associated with increased levels of abnormal accruals and suggest that increasing the size of the audit committee creates information asymmetry between the audit committee and management that reduces the monitoring capacity of the audit committee. We do not find any association between audit committee independence, financial and industry experience, or ownership concentration and abnormal accruals.

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    ID Code: 38099
    Item Type: Conference Paper
    Keywords: Corporate Governance, China, audit committee, ownership concentration
    Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BUSINESS AND MANAGEMENT (150300)
    Divisions: Current > QUT Faculties and Divisions > QUT Business School
    Current > Schools > School of Accountancy
    Copyright Owner: Copyright 2009 Please consult the authors.
    Deposited On: 21 Oct 2010 17:14
    Last Modified: 06 Jan 2011 00:00

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