Local Political Corruption and Firm’s Non-GAAP Reporting

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Original languageEnglish
Publication statusPublished - Oct 2019

Conference

TitleAmerican Accounting Association Mid-west Region Meeting 2019
Location
PlaceUnited States
CityChicago
Period17 - 19 October 2019

Abstract

This study examines the influence of local political corruption on firm’s non-GAAP reporting. Using U.S. Department of Justice data on the number of government officials’ corruption convictions, we find that when facing a high corrupt local government, firms (1) are less likely to report non-GAAP earnings, (2) have less aggressive non-GAAP earnings disclosures, and (3) have a significant decline in the exclusion magnitudes of non-GAAP earnings. The results are robust to controlling demographic characteristics, employing three alternative corruption measures, using instrumental variable approach, and conducting difference-in-difference analysis based on firms’ relocation. Further, we find that the effect of local political corruption on firms’ non-GAAP earnings disclosure is more pronounced for firms with concentrated operations in their headquarter states. Overall, the results suggest that managing non-GAAP reporting is one channel through which firms could deter rent-seeking by corrupt local officials.

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Research Unit(s) information for this publication is provided by the author(s) concerned.

Citation Format(s)

Local Political Corruption and Firm’s Non-GAAP Reporting. / CHEN, Xia; Jiang, Xuejun; Lu, Louise Yi; YU, Yangxin.

2019. Paper presented at American Accounting Association Mid-west Region Meeting 2019, Chicago, Illinois, United States.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review