Accounting in Progress: Have Rising Standards Improved Earnings Quality in China?

A lack of transparency in the accounts of listed Chinese companies has long sounded warning bells for outside investors, particularly in the context of an insider economy with weak legal enforcement and low investor protection. But China has made great strides in adopting international financial accounting standards during the past 20 years. Researchers from the Australian School of Business have found this progress has improved earnings quality, though not across the board. In some cases, improving quality in one aspect of earnings has been at the cost of sacrificing another. Poor corporate governance is still a pressing concern.