Media Coverage, Unexplained Audit Fees and the Company's Earnings Management

Abstract

Abstract:

From the perspective of auditing, this paper investigates how the negative media coverage affects the company's earnings management behaviors, and further analyzes the impacting mechanism and the implementation path. The study with data of Chinese A-share listed companies from 2003-2014 proves that the more negative media coverage,the stronger motivation of earnings management for the managers and the more intending of choosing the real earnings management when they are accused of financial fraud by the media, which verifies the market pressure hypothesis. Further analysis shows that negative media coverage achieves some supervisory functions through external auditing. The more negative media coverage is, the higher the abnormal audit fees and the stronger inhibitory effect of the auditing on earnings management. In addition, it is also found that the authority of the media and the professionalism of the media coverage enhance the inhibitory effect of the auditing on earnings management. This paper shows that negative media coverage has a role in corporate governance by the way of auditing, and the governance effect relies on the authority and the professionalism of the media coverage.

Key words: media coverage, unexplained audit fees, accounting information, media heterogeneity

Ma Zhuang, Li Yanxi, Wang Yun, Zeng Weiqiang. Media Coverage, Unexplained Audit Fees and the Company's Earnings Management[J]. , 2018, 30(4): 219-234.

References

[1] Healy P. M., Wahlen J. M. A Review of the Earnings Management Literature and Its Implications for Standard Setting[J]. Accounting Horizons, 1999,13(4):365-383
[2] 刘启亮,李祎,张建平. 媒体负面报道、诉讼风险与审计契约稳定性——基于外部治理视角的研究[J]. 管理世界, 2013,(11):144-154
[3] 于忠泊,田高良,齐保垒,等. 媒体关注的公司治理机制——基于盈余管理视角的考察[J]. 管理世界, 2011,(9):127-140
[4] Dyck A., Zingales L. The Corporate Governance Role of the Media[R]. NBER Working Paper, 2002
[5] Miller G. S., Skinner D. J. The Evolving Disclosure Landscape:How Changes in Technology, the Media and Capital Markets Are Affecting Disclosure[J]. Journal of Accounting Research, 2015,53(2):221-239
[6] Peress J., Fang L. Media Coverage and The Cross-section of Stock Returns[J]. Journal of Finance, 2009,64(5):2023-2052
[7] Dai L., Parwada J. T., Zhang B. The Governance Effect of the Media's News Dissemination Role:Evidence from Insider Trading[J]. Journal of Accounting Research, 2015,53(2):331-366
[8] 李明,叶勇. 媒体负面报道对控股股东掏空行为影响的实证研究[J]. 管理评论, 2016,28(1):73-82
[9] Dyck A., Volchkova N., Zingales L. The Corporate Governance Role of the Media:Evidence from Russia[J]. The Journal of Finance, 2008,63(3):1093-1135
[10] Dyck A., Zingales L. Private Benefits of Control:An InternationalComparison[J]. The Journal of Finance, 2004,59(2):537-600
[11] 李培功,沈艺峰. 媒体的公司治理作用:中国的经验证据[J]. 经济研究, 2010,(4):14-27
[12] 醋卫华,李培功. 媒体监督公司治理的实证研究[J]. 南开管理评论, 2012,15(1):33-42
[13] 贺建刚,魏明海,刘峰. 利益输送、媒体监督与公司治理:五粮液案例研究[J]. 管理世界, 2008,(10):141-150
[14] 李延喜,吴笛,肖峰雷,等. 声誉理论研究述评[J]. 管理评论, 2010,22(10):3-11
[15] Tetlock P. C. All the News That's Fit to Reprint:Do Investors React to Stale Information?[J]. Review of Financial Studies, 2011,24(5):1481-1512
[16] 戴亦一,潘越,陈芬. 媒体监督, 政府质量与审计师变更[J]. 会计研究, 2013,(10):89-95
[17] 吕敏康,冉明东. 媒体报道影响审计师专业判断吗?——基于盈余管理风险判断视角的实证分析[J]. 审计研究, 2012,(6):82-89
[18] Joe J. R. Why Press Coverage of AClient Influences The Audit Opinion[J]. Journal of Accounting Research, 2003,41(1):109-133
[19] Mutchler J. F., Hopwood W., Mckeown J. M. The Influence of Contrary Information and Mitigating Factors on Audit Opinion Decisions on Bankrupt Companies[J]. Journal of Accounting Research, 1997,35(2):295-310
[20] Bronson S. N., Ghosh A., Hogan C. E. Audit Fee Differential, Audit Effort and Litigation Risk:An Examination of ADR Firms[J]. Contemporary Accounting Research, 2017,34(1):83-117
[21] Simunic D. A. The Pricing of Audit Services:Theory and Evidence[J]. Journal of Accounting Research, 1980:161-190
[22] Chan W. S. Stock Price Reaction to News and No-news:Drift and Reversal after Headlines[J]. Journal of Financial Economics, 2003,70(2):223-260
[23] Fang L., Peress J. Media Coverage and The Cross-section of Stock Returns[J]. The Journal of Finance, 2009,64(5):2023-2052
[24] 曹裕,余振宇,万光羽. 新媒体环境下政府与企业在食品掺假中的演化博弈研究[J]. 中国管理科学, 2017,(6):179-187
[25] 张龙平,吕敏康. 媒体意见对审计判断的作用机制及影响——基于新闻传播学理论的解释[J]. 审计研究, 2014,(1):53-61
[26] Doogar R., Sivadasan P., Solomon I. Audit Fee Residuals:Costs or Rents?[J]. Review of Accounting Studies, 2015,20(4):1-40
[27] Fan J. P., Wong T. J. Do External Auditors Perform ACorporate Governance Role in Emerging Markets? Evidence from East Asia[J]. Journal of Accounting Research, 2005,43(1):35-72
[28] Bell T. B, Lsman W. R., Shackelford D. A. Auditors' Perceived Business Risk and Audit Fees:Analysis and Evidence[J]. Journal of Accounting Research, 2001,39(1):35-43
[29] Mccombs M. E., Shaw D. L. The Agenda-setting Function of Mass Media[J]. Public Opinion Quarterly, 1972,36(2):176-187
[30] Mccombs M. A Look at Agenda-setting:Past, Present and Future[J]. Journalism Studies, 2005,6(4):543-557
[31] Jensen M. C. "Toward a Theory of the Press" in Economics Social Institutions[M]. Boston:Martinus Nijhoff, 1979
[32] Jamieson K. H., Campbell K. K. News, Advertising, Politics and The Mass Media:The Interplay of Influence[M]. Beijing:Peking University Press, 2004
[33] Miller G. S. The Press as a Watchdog for Accounting Fraud[J]. Journal of Accounting Research, 2006,44(5):1001-1033
[34] 龚启辉,吴联生,王亚平. 两类盈余管理之间的部分替代[J]. 经济研究, 2015,50(6):175-188
[35] 陈克兢,李延喜,孙文章,等. 制度约束还是制度诱导?——中国上市公司盈余管理策略演变的经验证据[J]. 管理评论, 2016,28(5):122-136
[36] 李彬,张俊瑞,曾振. 实际活动操控、应计项目操控与会计弹性[J]. 管理评论, 2011,23(11):160-168
[37] Cohen D. A., Zarowin P. Accrual-based and Real Earnings Management Activities Around Seasoned Equity Offerings[J]. Journal of Accounting and Economics, 2010,50(1):2-19
[38] Roychowdhury S. Earnings Management through Real Activities Manipulation[J]. Journal of Accounting and Economics, 2006,42(3):335-370
[39] Dechow P. M., Kothari S. P. L., Watts R. The Relation between Earnings and Cash Flows[J]. Journal of Accounting and Economics, 1998,25(2):133-168
[40] 张艳,李书锋. 上市公司审计收费影响因素的实证分析[J]. 管理评论, 2004,16(5):27-30
[41] Hribar P., Kravet T., Wilson R. A New Measure of Accounting Quality[J]. Review of Accounting Studies, 2014,19(1):506-538
[42] 蔡春,李明,和辉. 约束条件、IPO盈余管理方式与公司业绩——基于应计盈余管理与真实盈余管理的研究[J]. 会计研究, 2013,(10):35-42
[43] 李增福,董志强,连玉君. 应计项目盈余管理还是真实活动盈余管理?——基于我国2007年所得税改革的研究[J]. 管理世界, 2011,(1):121-134
[44] Ettredge M. L., Li C., Sun L. The Impact of SOX Section 404 Internal Control Quality Assessment on Audit Delay in the SOX Era[J]. Auditing:A Journal of Practice & Theory, 2006,25(2):1-23
[45] Knechel W. R., Payne J. L. Additional Evidence on Audit Report Lag[J]. Auditing:A Journal of Practice & Theory, 2001,20(1):137-146