According to financial distress theory, the incentives for Non-SOEs to manipulate earnings are stronger than in SOEs, since SOEs have the advantage to receive financial subsidies from government while Non-SOEs face more financing constraints.
The agency theory, however, argues that state ownership in SOEs creates incentives and regulatory backing for self-serving purposes, thus motivating SOEs to manipulate accounting numbers.
The problem of poor governance has also affected potential investors having interests in investing into the corporation.
The sole source of governance issues has been monopoly management in the corporation.
The second study documents that Chinese SOEs overall exhibit a lower earnings quality than Non-SOEs, supporting the agency theory.
Government ownership might create incentives and regulatory backing for self-serving purposes that negatively influence the listed firms’ financial reporting.The objective of this thesis is to investigate accounting information reliability and corporate governance by addressing three predominant empirical research questions in three studies.The first study examines the impact of board composition and independence on earnings management in mainland China through investigating whether independent directors and supervisors are effective at restraining earnings management.This research contributes to provide a better understanding of the nature of accounting information reliability by measuring the relation between the informativeness of earnings and corporate governance based on the Chinese context with its unique political, social, cultural and economic environment and large sample size.In particular, mainland China has a distinct two-tier board structure comprising a supervisor board including employee representatives and board of directors of whom at least one third are independent directors.The report aims not only at investigating the governance problems in the corporation, but also at giving the possible recommendations to the respective governance issues in the corporation.Alibaba Group Holding Limited is a company dealing with online sale of goods and services to clients. Its sales platform involves providing consumer-to-consumer, business-to-consumer, and business-to-business sales services through the use of web portals.The corporation underwent improvements that led to its current market diversification.This paper is a voluminous report on the issue of poor corporate governance in Alibaba Holdings Ltd considering the fact that even despite the high performance of the company, it has been undergoing challenges in its corporate structure hence the need for engaging conclusive solutions and recommendations or effective control was also present.The political cost hypothesis complements the agency theory and illustrates that SOEs’ managers would manipulate accounting numbers in response to government intervention (report conservatively to disguise the profits or report aggressively to meet specific thresholds).In addition, it tests whether analysts' forecasts are more accurate than forecasts based on time-series predicted statistics with random walk.