HIGHLIGHTS

Do the Customers’ Annual Earnings Announcements Have the

Contagion Effect to Suppliers within Supply Chain?

WANG Xiongyuan1 GAO Xi2

(1.School of Accounting, Zhongnan University of Economics and Law,Wuhan 430073,China;

2. School of Accounting,Yunnan University of Finance and Economics, Kunming 650221,China)

JOURNAL OF ZHONGNAN UNIVERSITY OF ECONOMICS AND LAW No．3．May 15，2017

HIGHLIGHTS

Do the Customers’ Annual Earnings Announcements Have the

Contagion Effect to Suppliers within Supply Chain?

WANG Xiongyuan1GAO Xi2

·3·

(1.SchoolofAccounting,ZhongnanUniversityofEconomicsandLaw,Wuhan430073,China;

2.SchoolofAccounting,YunnanUniversityofFinanceandEconomics,Kunming650221,China)

This paper investigates whether customers’ annual earnings announcements could affect the stock price reaction of their suppliers. The research finds as followings: firstly, after the release of annual earnings announcements, the stock cumulated abnormal return(CAR) of suppliers is positively related with the CAR of their customers. Secondly, the information contagion effect experienced by a supplier is increasing in the intra-industry information transfer at the time of a customer’s annual earnings announcements, the investors of the suppliers pay more attention on the clients’ information. Thirdly, When the stocks are larger absolute value or negative of unexpected earnings, high variance operating income and costs, lower the level of earnings management and the stronger earnings persistence is stronger, the customer earnings announcements have stronger contagions effect on suppliers. Finally, the information contagion effect is improving in the bonds between customers and suppliers. Based on intra-industry contagion effects, this paper expands related research to the contagion of supply chain, and contributes to the literatures on contagion effect and supply chain.

Contagion Effect; Earnings Announcement; Customer Supplier Relationships; Market Reaction

Internal Control Quality, Information Transparency and Stock Price Informativeness

HUANG Zheng ZHONG Tingyong LIU Yifang

·14·

(1.SchoolofBusiness,NortheastNormalUniversity，Changchun130117，China；

2.SchoolofAccounting，ChongqingTechnologyandBusinessUniversity，Chongqing400067，China)

Abstract:The internal control as a control system to compensate for the incompleteness of contract，its effectiveness directly determines the level of information transparency，and then affects the information efficiency of the stock market. Based on Chinese market environment，this paper discusses the relationship between internal control quality and stock price informativeness，and empirically analyzes the intermediary role of information transparency from the perspective of accrual earnings management and real earnings management. The results show that，with the continuous improvement of internal control quality，the stock price informativeness of listed companies is significantly improved；high quality internal control can inhibit the accrual earnings management and real earnings management what are behaviors can decline information transparency to promote the stock price informativeness. In the control of the endogenous and other issues，the conclusions are still set up. This paper not only expands the researches of the economic consequences of internal control and the influence factors of stock price informativeness，but also provides valuable reference for improving the information efficiency of the stock market.

Key words:Internal Control Quality；Information Transparency；Accrual Earnings Management；Real Earnings Management；Stock Price Informativeness

Study on the Association between IT Investment and Audit Decision in China

ZHANG Ziyu

·24·

(SchoolofAccounting,AnhuiUniversityofFinance&Economics,Bengbu233030,China)

Abstract:The increasing IT investments of enterprises have an important impact on reporting environment and audit decision under the background of digital age. So this paper examines the relationship between ERP investment and audit decision by using 361 IT enterprises and matched control sample groups, As is shown by this paper that audit fees increase significantly after IT investments and that IT investments are not correlated with the probability of receiving a clean audit opinion. In addition, the level of effectiveness of enterprises’ internal control appears slight improvement after IT investments. The conclusion indicates that the risk of material misstatement have no obvious change after IT investments of Chinese enterprises, which result in no significant change in audit opinion after IT investments. And the increasing audit fees are not because of the risk of material misstatement, but because of low audit efficiency due to additional audit procedures and increased learning cost.

Key words:IT Investment; Audit Decision; Audit Opinion; Audit Fee

Short Selling Pressure and Corporate Cash Holdings: Evidence from A Quasi-natural Experiment

DONG Jie1ZHANG Xinling1CHEN Shenglan2

·31·

(1.SchoolofEconomicsandManagement,InnerMongoliaAgriculturalUniversity,Hohehot010018,China;

2.SchoolofEconomicsandManagement,InnerMongoliaUniversity,Hohehot010021,China)

Abstract:Investors can sell short on designated stocks on China stock market since March 2010 when the CSRC relieved the short sale constraint, which provides a quasi-natural experiment to examine whether short selling pressure affects corporate cash holdings. Using the sample of Chinese listed firms during 2007-2014, our results show that short selling pressure from removing of the short sale constraints has a negative effect on corporate cash holdings. Further, we find that the negative effect from short sale is much stronger for firms in the less competitive industries, with higher bankruptcy risk and lower financial constraints. The results also demonstrate that removal of the short sale constraints can increase the value of cash holdings. Our findings provide further insight into discipline effect of short sale on corporate insiders in pursuing the private benefits through holding excessive cash.

Key words:Short Selling Pressure; Deregulation of Short Selling Constraint; Cash Holdings; Value of Cash Holdings

The Spillover Effects of Transport Infrastructure on the Producer Services:

A Spatial Econometric Analysis Based on the Provincial Data

JIANG Hexin

·46·

(SchoolofBusiness,ShanghaiNormalUniversity,Shanghai200234,China)

Abstract:As the provider of professional and rapid response productive services, the producer service enterprises tend to cluster in the traffic developed area. The research based on 2005-2015 provincial spatial econometric confirms the above conclusion, namely, regional transportation infrastructure has significant positive influence on the development of local producer services. Furthermore, the development of producer services itself has a positive spillover effect on the adjacent regions, and the spillover effect mainly occurs between regions with similar market size and economic development level, while geographical adjacent is relatively less important. This conclusion can partly explain the divergence in the development of the producer services industry among regions that are geographically adjacent but with different market size and economic development. By decomposing the space spillover effect, the author finds the regional transportation infrastructure had weak positive spillover effect on the adjacent regions, which may be caused by the offset effect among different regions. Therefore, the government needs to invest and build the transportation infrastructure based on the development stage and potential of the regional producer services industry.

Key words:Transport Infrastructure; Spatial Spillover Effect; Producer Services

The Quality of Accounting Information, Political Connections and the Cost of Corporate Bonds:

An Empirical Study Based on Chinese Listed Companies

TAO Xionghua CAO Songwei

·89·

(SchoolofFinance,ZhongnanUniversityofEconomicsandLaw,Wuhan430073,China)

Abstract:As a non-systematic factor, political connection can affect the way how market determines the resource allocation. And as a highly market-oriented process, the cost of corporate bonds is affected by many factors. This article analyzes how the quality of accounting information and political connections influence the cost of corporate bonds based on a sample of Chinese listed companies from 2007 to 2015. By using a series of empirical approach, we find that the quality of accounting information can decrease the cost of corporate bonds. However, the political connections can weaken the position of accounting information in determining the above cost and these mechanisms are more pronounced in the area which has made less achievement in the process of marketization. All these results show that political connections serve as an implicit guarantee in debt financing, which is far different from the purpose of setting the corporate debt market. So enhancing the degree of debt market marketization and improving the information disclosure mechanisms can have positive significance on promoting the development of our debt market and decreasing the cost of corporate financing.

Key words:Political Connections; Accounting Information Quality; Corporate Bond; Financing Cost

The Effect of Exchange Rate Shock on the Behavior of Firm Exit:

Evidence from Reform of RMB Exchange Rate Regime in 2005

YU Jingwen

·106·

(SchoolofEconomicsandManagement,WuhanUniversity,Wuhan430072,China)

Abstract:This paper attempts to investigate the causal effect of exchange rate movement on firm exit behavior based on the reform of RMB exchange rate regime in 2005. The firm level exchange rate exposure index is constructed through the combined database of Chinese Industrial Enterprises Database (CIED) and Customs Data to identify the influence mechanism. The results reveal that the exchange rate shock induced by reform of RMB exchange rate regime in 2005 promotes the probability of firm exit in the next year through the intensified competition environment. Specifically, exchange rate shock could explain the nearly nineteen percent of firm exit in 2006. Further investigation demonstrates that the impact of exchange rate shock is more pronounced for less efficient firms. This implies that exchange rate shock could improve the resource allocation efficiency. The research also reveals the important role of exchange rate played in the industrial restructuring as well as the transition of economic growth pattern. Additionally, the financial constraints could affect the relationship between the exchange rate shock and the firm exit behavior profoundly. The release of the financial constraints reduces the negative effect of exchange rate shock.

Key words:Exchange Rate Shock; Market Competition; Firm Exit

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