The past 25 years have seen an exponential growth in the number of China studies in the leading accounting journals. The rise in China-related research mirrors the country's increased importance on the global stage and a growing appreciation of the economic importance of Chinese institutions. We organize our review of the China literature around three central themes: 1) political and regulatory institutions, 2) China's relationships with foreign investors, and 3) the availability of novel data and regulatory shocks. The former two themes address research questions that are more China-centric, while the third exploits the China setting to examine questions that are more universal. We highlight the contributions that China studies have made to the broader accounting literature, the limitations of the current literature, and we offer suggestions for future research directions.

In within-firm analysis of 1,805 executives, executives implicated in financial reporting fraud cases have significantly stronger equity incentives than their within-firm peers who are not implicated in the fraud. Executives implicated in fraud cases also have significantly stronger equity incentives than executives at non-fraud firms in similar roles. However, the equity incentives of non-implicated executives at fraud firms are no different than those for executives at non-fraud firms. The results are significant across executive roles and for equity incentives measured as wealth sensitivity to changes in stock price or stock price volatility. Executive-level analysis that considers which executives are implicated in the fraud may provide more precise measurement of the association and statistical significance of the relationship between equity incentives and fraud. Finally, firm-level measures that consider the equity incentives of all members of the top management team may better identify fraud firms than do measures focusing on one executive.

We survey 462 financial journalists and conduct 18 interviews to obtain insights on the inputs to their reporting, the incentives they face, and the factors that influence their coverage decisions. We report many findings relevant to the accounting literature and identify multiple avenues for future research. For example, financial journalists say the likelihood they write about a specific company or CEO increases when the company is controversial or the CEO has a colorful personality, suggesting journalists gravitate toward provocative topics. We also find that financial journalists routinely use company-issued disclosures and private phone calls with company management when developing articles, and that they believe they are evaluated primarily on the accuracy, timeliness, and depth of their articles. Journalists also believe monitoring companies to hold them accountable is one of financial journalism's most important objectives, but they often face negative consequences for writing articles that portray companies in an unfavorable light.

Government subsidies allocated by politicians are ultimately funded by taxpayers, who care about how tax money is spent and demand transparency. I argue that subsidized firms, as beneficiaries of government subsidies, have incentives to provide more disclosures to help politicians achieve a reputation for transparency as well as to lower their own costs from public scrutiny. Using a novel dataset that tracks government subsidies, I provide the first large-sample evidence on the relation between government subsidies and firm disclosure. I find that relative to unsubsidized firms, subsidized firms provide more voluntary disclosures of general information about their business activities and profitability, as well as more disclosures of subsidy-goal-related information, such as job creation and capital investment. Further, these associations are stronger for firms operating in or obtaining subsidies from states whose politicians reveal a stronger preference for subsidy transparency, and for firms that are more likely to attract public scrutiny.

We examine the effect of CSR information on stakeholder decision-making, specifically on supply-chain contracting. To obtain plausibly exogenous variation in CSR information, we exploit the 2017 expansion of CSR rating coverage from Russell 1000 to Russell 2000 firms (hereafter, “treated firms”) by Thomson Reuters Asset4. Using a difference-in-differences design with the previously covered Russell 1000 supplier firms as the control group, we find a negative effect of the CSR information shock for treated suppliers with comparatively low CSR ratings. On average, these suppliers experience reductions in their number of contracts and corporate customers. In cross-sectional analyses, we document variation in our treatment effects consistent with two underlying mechanisms: (i) benchmarking of suppliers' CSR by corporate customers and (ii) CSR-related public pressure on customer-supplier contracting. Collectively, our findings provide novel evidence on the causal effect of CSR information on stakeholder decision-making.

Do accruals-based earnings provide better information about future operating cash flows than do operating cash flows themselves, as predicted by the Financial Accounting Standards Board's conceptual framework (FASB, 1978)? While this is a foundational issue in accounting, because it addresses the information added by accrual accounting methods, testing it remains unsettled. We show that when comparing the predictive ability of operating cash flows with that of an equivalent earnings measure calculated on an accrual basis, earnings outperform operating cash flows. The result becomes more pronounced when allowance is made for cross-sectional differences in the relation between firms' earnings and future cash flows. In fact, even “bottom line” earnings then have similar explanatory power as operating cash flows.

We analyze nearly 7,000 shareholder activist campaigns across 56 countries and show that shareholder activism is now a global phenomenon. Our analyses provide evidence on factors that explain the spread of activism and two related questions. First, we measure the extent to which country-level governance regulations facilitate shareholder engagement, a necessary condition for activism, and show that our measure of shareholder-empowering governance regulation explains cross-country variation in the emergence of activism. Second, we show that changes in these regulations also affect outcomes for firms that face a high threat of activism but that are not targeted by activists (i.e., there are spillovers)—including increased profitability, higher payouts, and reduced investment. These effects are most pronounced in countries with weak minority shareholder rights, where activism had previously been relatively unimportant.

This paper reviews the empirical methods used in the accounting literature to draw causal inferences. Recent years have seen a burgeoning growth in the use of methods that seek to exploit as-if random variation in observational settings—i.e., “quasi-experiments.” We provide a synthesis of the major assumptions of these methods, discuss several practical considerations relevant to the application of these methods in the accounting literature, and provide a framework for thinking about whether and when quasi-experimental and non-experimental methods are well-suited for addressing causal questions of interest to accounting researchers. While there is growing interest in addressing causal questions within the literature, we caution against the idea that one should restrict attention to only those causal questions for which there are quasi-experiments. We offer a complementary approach for addressing causal questions that does not rely on the availability of a quasi-experiment, but rather relies on a combination of economic theory, developing and falsifying alternative explanations, triangulating results across multiple settings, measures, and research designs, and caveating results where appropriate

This discussion makes several observations regarding the past 25 years of China-related accounting research reviewed in Lennox and Wu (2022). First, we discuss factors of supply and demand that led to the rise of China-related studies and how this growth has contributed to the internationalization of accounting research. We note that the taxonomy of the literature by geographic region rather than topic or methodology is unusual and makes it difficult to formulate a common framework that would help organize the many contributions. Next, we distill distinct patterns in authorship, choice of topics, and asserted contributions of China-related studies. Studies are increasingly shaped by the availability of new data and regulatory reforms. These features should be interpreted carefully, as most reforms are interconnected and reflect the purposeful outcome of a tightly controlled economy. As a result, issues of generalizability arise. Alternatively, researchers could embrace the China setting and strive to identify the local institutional forces that make it special. We see such a more institutional, context-specific view of China-related—or better—international research as an opportunity for the field. We close by presenting five broad themes we view as promising areas for future China-related research.

Prior research provides mixed evidence about whether competition among auditors impairs or improves audit quality. An impediment to this stream of research is the inability of researchers to observe the audit engagement bidding process. We develop a method of detecting bidding by applying a machine learning algorithm to non-incumbent (i.e., competitor) auditor views of public companies’ SEC filings. We validate our method using a proprietary sample where all instances of bidding are known. We then examine the associations between bidding, audit quality, and audit pricing. Contrary to concerns that competitive pressure may cause auditors to compromise their independence, we find that incumbent auditors perform higher quality audits during bidding years. This improvement in audit quality occurs regardless of whether the bidding ultimately results in an auditor change and persists for several years when the incumbent auditor wins reappointment. We also find that bidding is associated with modest audit fee concessions.