Numerological superstition and earnings management: evidence from China
An emerging line of research examining the role of numerological superstition in the capital market shows that it has significant impact on investor behavior (Bhattacharya, Kuo, Lin, & Zhao, 2018; Hirshleifer, Jian, & Zhang 2018). However, to the authors’ best knowledge, there is a dearth of...
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| Format: | Article |
| Language: | English |
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Emerald Publishing
2023-09-01
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| Series: | China Accounting and Finance Review |
| Subjects: | |
| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/CAFR-01-2023-0001/full/html |
| _version_ | 1797682403977723904 |
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| author | Mengjie Huang Kunpeng Sun Yuan Xie |
| author_facet | Mengjie Huang Kunpeng Sun Yuan Xie |
| author_sort | Mengjie Huang |
| collection | DOAJ |
| description | An emerging line of research examining the role of numerological superstition in the capital market shows that it has significant impact on investor behavior (Bhattacharya, Kuo, Lin, & Zhao, 2018; Hirshleifer, Jian, & Zhang 2018). However, to the authors’ best knowledge, there is a dearth of evidence on whether numerological superstition affects corporate behavior. This study fills this void by examining the association between investors’ numerological superstition and earnings management using Chinese data.
Chinese culture views 6 and 8 as lucky numbers. Using Chinese publicly traded firms, the authors examine the relation between investors’ numerological superstition and corporate financial reporting behavior.
The results suggest that firms reporting lucky earnings-per-share (EPS) numbers ending with 6 or 8 are more likely to engage in earnings management. These firms also raise more capital through seasoned equity offerings in the following year; however, they do not have more capital investments. Instead, their controlling shareholders siphon a significant amount of capital through related party transactions. Overall, the findings suggest that managers collude with controlling shareholders to manage earnings by exploiting the superstitious beliefs of minority shareholders.
To the authors’ best knowledge, there is a dearth of evidence on whether numerological superstition affects corporate behavior. This study fills this void by examining the association between investors’ numerological superstition and earnings management using Chinese data. |
| first_indexed | 2024-03-11T23:59:16Z |
| format | Article |
| id | doaj.art-8584aeee5aec49c29bb4ad5104aaeac3 |
| institution | Directory Open Access Journal |
| issn | 2307-3055 |
| language | English |
| last_indexed | 2024-03-11T23:59:16Z |
| publishDate | 2023-09-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | China Accounting and Finance Review |
| spelling | doaj.art-8584aeee5aec49c29bb4ad5104aaeac32023-09-18T06:06:54ZengEmerald PublishingChina Accounting and Finance Review2307-30552023-09-0125339641810.1108/CAFR-01-2023-0001Numerological superstition and earnings management: evidence from ChinaMengjie Huang0Kunpeng Sun1Yuan Xie2Fordham UniversityCentral University of Finance and EconomicsFordham UniversityAn emerging line of research examining the role of numerological superstition in the capital market shows that it has significant impact on investor behavior (Bhattacharya, Kuo, Lin, & Zhao, 2018; Hirshleifer, Jian, & Zhang 2018). However, to the authors’ best knowledge, there is a dearth of evidence on whether numerological superstition affects corporate behavior. This study fills this void by examining the association between investors’ numerological superstition and earnings management using Chinese data. Chinese culture views 6 and 8 as lucky numbers. Using Chinese publicly traded firms, the authors examine the relation between investors’ numerological superstition and corporate financial reporting behavior. The results suggest that firms reporting lucky earnings-per-share (EPS) numbers ending with 6 or 8 are more likely to engage in earnings management. These firms also raise more capital through seasoned equity offerings in the following year; however, they do not have more capital investments. Instead, their controlling shareholders siphon a significant amount of capital through related party transactions. Overall, the findings suggest that managers collude with controlling shareholders to manage earnings by exploiting the superstitious beliefs of minority shareholders. To the authors’ best knowledge, there is a dearth of evidence on whether numerological superstition affects corporate behavior. This study fills this void by examining the association between investors’ numerological superstition and earnings management using Chinese data.https://www.emerald.com/insight/content/doi/10.1108/CAFR-01-2023-0001/full/htmlsocial environmentsuperstitionearnings managementshareholder welfare |
| spellingShingle | Mengjie Huang Kunpeng Sun Yuan Xie Numerological superstition and earnings management: evidence from China China Accounting and Finance Review social environment superstition earnings management shareholder welfare |
| title | Numerological superstition and earnings management: evidence from China |
| title_full | Numerological superstition and earnings management: evidence from China |
| title_fullStr | Numerological superstition and earnings management: evidence from China |
| title_full_unstemmed | Numerological superstition and earnings management: evidence from China |
| title_short | Numerological superstition and earnings management: evidence from China |
| title_sort | numerological superstition and earnings management evidence from china |
| topic | social environment superstition earnings management shareholder welfare |
| url | https://www.emerald.com/insight/content/doi/10.1108/CAFR-01-2023-0001/full/html |
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