Top Executives’ Ability and Earnings Quality: Evidence from the Chinese Capital Markets

Abstract

Earnings Quality can be influenced by the industry, the firm and the manager. Prior researches focus more on the industry and the firm. Currently, to measure the relationship between earnings quality and the managerial ability is interested by scholars. This paper tries to analyze the listed firms in Chinese Capital Markets and to measure the managerial ability in these firms by applying data envelopment analysis (DEA) and regression models. In this research, violation against accounting standards in financial reporting and DACC (Discretionary Accruals) are used to measure the earnings management. With the analysis, I find that earnings quality of these public firms is highly related with managerial ability in Chinese listed companies.