State Ownership and Accounting Quality: Evidence from State-Owned Enterprises in China

The inherent problems of state-owned enterprises (SOEs), such as the lack of external monitoring, may harm their accounting quality. However, the results from prior research are not consistent. Therefore, this study investigates the effect of state ownership of SOEs on accounting quality, measured by earnings management. Using the samples of listed SOEs in the A-share market in China from 2009 to 2017, the results indicate that there is a significant and positive relationship between state ownership and earnings management. Furthermore, the results show that higher competition within the industry can effectively inhibit the negative effect of state ownership on accounting quality. Interestingly, the positive relationship between state ownership and earnings management has weakened in recent years, suggesting that the recent mixed-ownership reform of SOEs is effectively working. Collectively, current study extends prior research by focusing on SOEs in a planned economy and by combining the mixed-ownership reform with earnings management. Consequently, this study provides practical implication to regulatory bodies by showing that state ownership plays an important role in the accounting quality of SOEs.

Current Situation of Chinese State-Owned Assets Management

This article introduces the current scale and development of Chinese state-owned assets; the situation about separating government functions from State-Owned Enterprise management and state-owned capital in China; modern corporate system construction and improvement in SOEs, as well as the shortages in the process; comprehensive and deep mixed ownership reform and equity diversification reform at SOEs and for state-owned assets; enhancement of Chinese Communist Party construction in SOEs; SOEs’ great effort on innovation promotion; institutions and governments’ assets management; and the situation of state-owned assets’ concentration.

RESEARCH ON THE INFLUENCE OF MIXED OWNERSHIP REFORM ON FINANCIAL FLEXIBILITY OF STATE-OWNED ENTERPRISES

This paper selects the data of A-share manufacturing enterprises in 2010-2019 as the sample, and the impact of mixed ownership reforms on the financial flexibility of the state-owned enterprises was studied by double differential methods. The results showed that there were differences in the effects of mixed ownership reform on different types of flexible reserves of enterprises. In the reform, the state-owned enterprises have significantly improved the flexibility in the debt, but the flexibility in cash is significantly reduced. Finally, the article puts forward relevant recommendations for state-owned enterprises based on the above conclusions.

Can Mixed-Ownership Reform Drive the Green Transformation of SOEs?

In the construction of ecological civilization, green innovation has become an important driving force for the sustainable development of state-owned enterprises (SOEs). This paper uses panel data of state-owned listed enterprises from 2008 to 2019 to explore mixed-ownership reform’s influence on the green transformation of SOEs and its specific mechanisms. The results show that the diversity of mixed shareholders, the depth of mixed equity, and the restriction of mixed equity significantly promote the SOEs’ green innovation. Moreover, there are distinctions in the impact of the shareholding ratio of heterogeneous shareholders on green innovation. Only the increase in the shareholding ratio of foreign shareholders has a positive correlation with green innovation. The mechanism tests indicate that the mixed-ownership reform plays a governance role in the green transformation of SOEs by optimizing the reasonable allocation of environmental protection subsidies and propelling environmental social responsibility’s active performance. Our study further subdivides the significant promotion effect of mixed-ownership reform on green innovation, finding that it only exists in the SOEs in heavily polluting industries and regions with a high degree of marketization. Finally, we find that the ownership structure adjustment caused by the mixed-ownership reform has improved SOEs’ environmental management system and facilitated its sustainable development capabilities.