Hidden Related Party Relations and Real Earnings Management
We adopt a new method to measure the hidden relationship,i.e.to analyze whether there is a common person relationship and common connection between companies and their significant counterparties based on the big data of industry and commerce.We find that companies with hidden re-lated party relations have higher levels of real earning management,and the results of robustness tests are consistent.Further,this result is significant in the grouping of firms with higher concentration or more frequent changes in customer and supplier,firms with low industry concentration,firms with spe-cial inspection notices from CSRC and in low marketization regions.We provide ideas on the definition and measurement of the hidden related party rela-tions and the development of disclosure requirements for the related party.
Hidden Related Party RelationsReal Earning ManagementInformation DisclosureData of Industry and Commerce