Corporate Cash Holdings and Earnings Management: An analysis of fixed effect model

Wei Li; Zerui Wang; Zekai Zheng

doi:10.54691/bcpbm.v26i.2044

Authors

Wei Li
Zerui Wang
Zekai Zheng

DOI:

https://doi.org/10.54691/bcpbm.v26i.2044

Keywords:

Earnings management; cash holding; property rights; external supervision.

Abstract

Cash holding is closely related to corporate earnings management. The difference of earnings management plays an important role in the development of companies. The data in this paper comes from the China Stock Market Accounting Research (CSMAR) and uses Python and Stata to study the relationship between cash holding and earning management. The fundamental regression results obtained through the fixed effects model show that high cash holdings of enterprises can increase the level of earnings management, which is still valid after a series of robustness tests. Further, we find that cash holdings promote earnings management more strongly in companies whose auditors are not from the Big Four accounting firms and in state-owned enterprises.

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