Does Information Disclosure Matter?—Evidence from China's Multi-Tiered Capital Market System

Abstract

This paper contributes to the literature on whether the information disclosure system decreases earnings management. Using China's Multi-Tiered Capital Market including the Main Board, SME Board, and the ChiNext market, we find that earnings management can be effectively reduced by the disclosure system, and that the level of information disclosure is negatively related to earnings management. Comparing firms with a transparency ranking downgrade, we show that firms with a ranking upgrade tend to exhibit a significant decrease in their earnings management activities.